Chapter_20_-_Futures - utures Futures Chapter 20 Charles P....

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Unformatted text preview: utures Futures Chapter 20 Charles P. Jones, Investments: Analysis and Management, Tenth Edition, John Wiley & Sons Prepared by G.D. Koppenhaver, Iowa State University 20-1 Understanding Futures Markets pot or cash market Spot or cash market Price refers to item available for immediate delivery Forward market rice refers to item available for delayed Price refers to item available for delayed delivery Futures market Sets features (contract size, delivery date, and conditions) for delivery 20-2 Understanding Futures Markets utures market characteristics Futures market characteristics Centralized marketplace allows investors to trade each other Performance is guaranteed by a clearinghouse Valuable economic functions Hedgers shift price risk to speculators Price discovery conveys information 20-3 Understanding Futures Markets ommodities - gricultural metals and Commodities agricultural, metals, and energy related inancials - reign currencies as well Financials foreign currencies as well as debt and equity instruments oreign futures markets Foreign futures markets Increased number shows the move toward lobalization globalization Markets quite competitive with US 20-4 Futures Contract obligation to buy or sell a fixed A obligation to buy or sell a fixed amount of an asset on a specified ture date at a price set today future date at a price set today Trading means that a commitment has been made between buyer and seller Position offset by making an opposite contract in the same commodity Commodity Futures Trading Commission regulates trading 20-5 Futures Exchanges here futures contracts are traded Where futures contracts are traded Voluntary, nonprofit associations, of embership membership Organized marketplace where stablished rules govern conduct established rules govern conduct Funded by dues and fees for services ndered rendered Members trade for self or for others 20-6 The Clearinghouse...
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Chapter_20_-_Futures - utures Futures Chapter 20 Charles P....

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