Unformatted text preview: Trading on futures contracts Type of traders and their objectives Specification of a futures contract Open interest and trading volume Revision for mid ‐ session exam Pricing futures contracts Spot, forward, & futures prices and expected spot price in the future. Is futures price the same as forward pric ? 4 Is futures price the same as forward price? Value of a long forward contract Cost ‐ of ‐ carry relations for different underlying assets Arbitrage opportunity (strategies and risk ‐ free profits) Revision for mid ‐ session exam Hedging with futures Basis and Basis risk determining futures (long or short) positions and number of contract 5 and number of contracts • Mismatched maturity (h1) and mismatched underlying asset (h2) Estimation of hedge ratio Evaluation of hedging effectiveness (effective price and net gain/loss)...
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- Three '08
- Corporate Finance, Forward contract, forward contracts, pricing futures contracts, Mid‐Session Exam