Fowards - liquidity, and convenience of using one market...

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Click to edit Master subtitle style 5/30/11 Forwards Group - 6
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5/30/11 Introduction to Forward Both futures and forwards specify a trade between two counter-parties: There is a commitment to deliver an asset (this is the seller , or the short ), at a specified forward price. There is a commitment to take delivery of an asset (this is the buyer , or the long ), at a specified forward price. At delivery, cash is exchanged for the asset. Many times, futures contracts and forward contracts are substitutes. However, at other times, the relative costs,
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Unformatted text preview: liquidity, and convenience of using one market versus the other will differ. 5/30/11 Futures and Forwards: A Comparison Table Obj10 Futures Forwards 5/30/11 Forward Contracts: Payoff profit profit S(T) S(T) The long profits if the spot price at delivery, S(T), exceeds the original forward price, F(0,T). The short profits if the price at delivery, S(T), is below the original forward price, F(0,T). Long forward Short forward F(0,T) F(0,T) 5/30/11 Thank You...
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This note was uploaded on 05/30/2011 for the course ECON 101 taught by Professor Ke during the Spring '11 term at Lethbridge College.

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Fowards - liquidity, and convenience of using one market...

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