In the field of finance, futures contracts (more colloquially, futures ) are standard forward contracts, legal agreements to buy or sell at specified prices at a specified time in the future. Transacted assets are usually commodities or financial instruments. The predetermined price of the parties agrees to buy and sell the asset as it is known as the advanced price. The time specified in the future - ie when delivery and payment occurs - is known as delivery date . Because it is a function of the underlying asset, futures contracts are derived products.
Contracts are negotiated on futures exchanges, which act as markets between buyers and sellers. The buyer of the contract is said to hold the long position, and the seller is said to be the holder of the short position. Since both sides are risking their counterparts to walk away if prices conflict with them, the contract may involve both sides to determine the contract value limit with a trusted third party. For example, in gold futures trading, margins vary between 2% and 20% depending on spot market volatility.
The first futures contract is negotiated for agricultural commodities, and then futures contracts are negotiated for natural resources such as oil. The financial future was introduced in 1972, and in recent decades, currency futures, futures rates and stock market futures have played an increasingly large role in the overall futures market.
Initial use of futures contracts is to reduce the risk of price movements or exchange rates by allowing parties to fix prices or pricing for future transactions. This can be advantageous when (for example) the party expects to receive payments in foreign currency in the future, and wants to guard against unfavorable currency movements in the interval before payment is received.
However, futures also offer opportunities for speculation that a trader who predicts that the price of an asset will move in a certain direction may contract to buy or sell it in the future at a price that (if the prediction is true) will result in a profit.
Video Futures contract
Origin
The Dutch pioneered several financial instruments and helped lay the foundations of the modern financial system. In Europe, formal futures markets emerged in the Dutch Republic during the 17th century. Among the most famous of the early futures contracts were tulip futures that flourished during the peak of the Dutch Tulipmania in 1636. The DUHJima Rice Exchange, first established in 1697 in Osaka, was considered by some as the first futures exchange, to meet the needs of samurai who - paid for rice, and after a series of bad harvests - required stable conversion into coins.
The Chicago Board of Trade (CBOT) recorded the first standardized 'trade forward' contract in 1864, called a futures contract. This contract is based on grain trading, and starts a trend that sees contracts made on a number of different commodities as well as a number of futures exchanges that are established in countries around the world. In 1875, cotton futures were traded in Bombay in India and in recent years have expanded into the future on edible vegetable oils, raw hemp and hemp and gold bullion.
The 1972 Creation of the International Monetary Fund (IMM), the world's first financial futures exchange, launches currency futures. In 1976, IMM added interest rates on US treasury bills, and in 1982 they added stock market index futures.
Maps Futures contract
Risk mitigation
Although futures contracts are oriented to the point in time in the future, the main objective is to mitigate the default risk by either party in the intervening period. In this case, the futures exchange requires both parties to put up initial cash, or performance bonds, known as margins. Margin, sometimes set as a percentage of the value of futures contracts, should be maintained throughout the contract period to guarantee the agreement, because during this time the price of the contract may vary as a supply and demand function, causing one side of the exchange to lose money at the expense of another.
To mitigate the risk of failure, this product is marked to be marketed on a daily basis where the difference between the agreed starting price and the actual daily futures price are reevaluated on a daily basis. This is sometimes known as margin variation, in which the futures exchange will draw money from the losing party margin account and put it to the other party, ensuring that the correct loss or profit is reflected every day.
If the margin account is below a certain value set by the exchange, then margin call is made and the account owner must refill the margin account. This process is known as marking the market . Thus on the date of delivery, the amount exchanged is not the price specified on the contract but the spot value (because any profit or loss has been settled beforehand by marking to the market). After marketing, strike prices are often achieved and generate a lot of revenue for "callers".
Margins
To minimize credit risk to the exchange, traders must install margin or performance bonds, usually 5% -15% of contract value. Unlike the use of margins in equities, these performance bonds are not partial payments used to buy securities, but only the deposits in good faith are held to cover the daily obligations of maintaining the position.
To minimize counterparty risks for traders, trading conducted on regulated futures exchanges is guaranteed by clearing. The clearing house becomes the buyer for each seller, and the seller for each buyer, so that in the event of counterparty, default clearer assumes the risk of loss. This allows traders to trade without doing due diligence on their partners.
Margin requirements are ignored or reduced in some cases for hedgers who have physical ownership of closed commodities or dispersed traders who have contracts that balance positions.
Margins clearing is a financial safeguard to ensure that companies or companies engage in futures and open options for their customers. Clearing margins are different from the customer margins for which each buyer and seller of futures and option contracts are required to deposit with the broker.
Customer margins In the futures industry, financial guarantees are required from buyers and sellers of futures contracts and option contract sellers to ensure the fulfillment of contractual obligations. Futures Commission Merchants are responsible for overseeing customer's margin accounts. Margin is determined based on market risk and contract value. Also referred to as performance bond margin.
Initial margin is the equity needed to start futures positions. This is a type of performance bond. Maximum exposure is not limited to initial margin amount, but initial margin requirement is calculated based on the estimated maximum change in contract value in one trading day. The initial margin is determined by exchange.
If a position involves a product that is traded on the exchange, the amount or percentage of the initial margin is determined by the exchange in question.
In case of loss or if the initial margin value is being eroded, the broker will make a margin call to return the amount of initial margin available. Often referred to as "margin variations," the margin called for this reason is usually done every day, however, when high volatility brokers can make margin calls or intra-day calls.
Calls for margins are usually expected to be paid and received on the same day. Otherwise, the broker is entitled to close a position sufficient to meet the amount called by way of margin. Once the position is closed, the client is responsible for any resulting deficit in the client account.
Some US exchanges also use the term "maintenance margin", which essentially determines how much the initial margin value can be reduced before margin calls are made. However, most non-US brokers only use the terms "initial margin" and "variation margin".
Initial Margin Requirements are set by the futures exchange, in contrast to Initial Margin of other securities (set by the Federal Reserve in US Markets).
Futures accounts are flagged to the market daily. If the margin falls below the margin maintenance requirements set by the futures listing market, margin calls will be issued to bring the account back to the required level.
Maintenance margins Minimum margin sets per exception futures contract that customers must retain in their margin accounts.
Margin-equity ratio is a term used by speculators, representing the amount of their trading capital held as margin at a given time. Low margin requirements of futures results result in large investment leverage. However, exchanges require a minimum amount that varies depending on the contract and the merchant. The broker may set higher requirements, but may not set them lower. A trader, of course, can set it on top of that, if he does not want to be subject to margin calls.
Performance bond margin The amount of money held by the buyer and seller of a futures contract or seller of an option to ensure the performance of the term of the contract. Margin in commodities is not a payment of equity or an advance on the commodity itself, but rather a security deposit.
Return on margin (ROM) is often used to assess performance because it represents a gain or loss compared to the perceived risk of exchange as reflected in the required margin. ROM can be calculated (realized return)/(initial margin). The ROM Annualized is equal to (ROM 1) (year/trade_duration) -1. For example, if a trader earns 10% on margin in two months, it will be around 77% per year.
Settlement - physical term versus completed cash
Completion is the act of completing the contract, and can be done in one of two ways, as specified per type of futures contract:
- Physical delivery - the specified amount of the underlying asset of the contract is delivered by the seller of the contract to the exchange, and in exchange for the contract buyer. Physical delivery is common with commodities and bonds. In practice, that only happens to a small number of contracts. Most are canceled by buying a closing position - that is, buying a contract to cancel a previous sale (which includes a short), or selling a contract to liquidate a previous purchase (covering a long time). Nymex crude oil futures use this settlement method after expiration
- Cash payments - cash payments are made on the basis of the underlying reference level, such as short-term interest rate indices such as 90 Days T-Bills, or closing stock market index values. The parties settle by paying/receiving a loss/gain related to the contract in cash when the contract expires. Cash futures are those that, as a practical matter, can not be solved by the delivery of the referenced goods - for example, it is impossible to provide an index. Futures contracts may also choose to settle against indexes based on trading in related spot markets. ICE Brent futures use this method.
Expires (or Expires in the US) is the time and day when a particular delivery month of the futures contract terminates the trade, as well as the final settlement price for the contract. For many equity indices and interest rate futures contracts (as well as for most equity options), this occurs on the third Friday of a particular trading month. On this day t 1 futures contract becomes t futures contract. For example, for most CME and CBOT contracts, at the expiry of the December contract, the March futures contract becomes the closest contract. This is an exciting time for the arbitration table, which tries to make a quick profit over a brief period (maybe 30 minutes) where the underlying cash price and futures price sometimes struggle to converge. Currently, futures and underlying assets are highly liquid and the disparity between indexes and underlying assets is quickly traded by arbitrage. At this moment, the volume increase is caused by the trader rolling position to the next contract or, in the case of equity futures index, the purchase of the component underlying the index to protect the value against the current index position. At the expiration date, the European equity arbitrage trading table in London or Frankfurt will see the position expire in as many as eight major markets almost every half hour.
Pricing
When a given asset is present in an abundant inventory, or it can be made freely, then the price of the futures contract is determined by an arbitration argument. This is typical for stock index futures, futures bonds, and futures of physical commodities when they are in supply (eg farm crops after harvest). However, when commercially available commodities are not widely available or available - for example in pre-harvest crops or Futures Futures Eurodollar or Federal funds rate (where the underlying instrument should be made on delivery date) - futures prices can not be fixed by arbitrage. In this scenario there is only one power that sets the price, which is a simple supply and demand for future assets, as stated by supply and demand for futures contracts.
Arbitrage argument
The arbitration argument ("rational price") applies when the delivered assets are in abundant stock, or can be made freely. Here, the forward price represents the expected future value of the underlying discount at a risk-free rate - because any deviation from the theoretical price will give the investor a profit opportunity without risk and must be removed. We set the forward price to be a K strike so the contract has a value of 0 at the moment. Assuming a constant interest rate futures futures price equals the forward price of a forward contract with the same strike and maturity. This is also the same if the underlying asset is not correlated with the interest rate. Otherwise, the difference between the forward price in futures and the forward price on the asset, is proportional to the covariant between the asset price and the underlying interest rate. For example, futures on bonds without coupons will have lower futures prices than prices up front. This is called "futuristic convexity".
Accordingly, assuming a constant level, for simple non-dividend payment assets, the value of the forward/forward price, F (t, T) , will be found by adding the current value S ( t) at time t to maturity T with a risk-free return rate r .
atau, dengan perpaduan berkelanjutan
This relationship may be modified for storage, dividends, dividend and returns.
In a perfect market, the relationship between futures and spot prices depends only on the above variables; in practice there are various market imperfections (transaction costs, differential loans and lending rates, short selling restrictions) that prevent complete arbitration. Thus, the actual futures price varies within the arbitration limit around the theoretical price.
Pricing through expectation
When a commodity that can be delivered does not have sufficient inventory (or when none) the rational price can not be applied, because the arbitration mechanism does not apply. Here the futures price is determined by today's supply and demand for the underlying asset in the future.
In the deep and liquid markets, supply and demand will be expected to balance at prices that represent unobtrusive expectations of future real estate prices and are thus given by simple relationships.
Conversely, in a shallow and illiquid market, or in markets where a large number of assets that can be delivered are deliberately kept secret from market participants (illegal acts known as market corners), the market clearing price for futures may still represent a balance between supply and demand but the relationship between this price and the expected future price of the asset may be damaged.
Relationship between arbitrage arguments and expectations
Hope-based relationships will also continue to be in an arrangement without arbitration when we take expectations with regard to the risk-neutral probability. In other words: the futures price is martingale with respect to the risk-neutral probability. With this pricing rule, speculators are expected to break even when futures markets are fairly priced commodities that can be shipped.
Contango and underdevelopment
The situation in which the commodity price for future delivery is higher than the spot price, or where the price of future shipping is higher than the closer delivery in the future, known as contango. Conversely, where commodity prices for future deliveries are lower than spot prices, or where future shipping prices are lower than nearer future shipments, are known as underdevelopment.
Futures contracts and exchange
Contract
There are different types of futures contracts, which reflect different types of "tradable" assets where contracts can be based like commodities, securities (such as single stock futures), currencies or intangible items such as interest rates and indices. For information about futures markets in specific underlying commodity markets, follow the links. For a list of commercially tradable futures contracts, see List of traded commodities. See also futures exchange article.
- Foreign exchange market - see Future currency
- Money market - see Interest rates in the future
- The bond market - see future interest rates
- Stock market - see Future index of stock market and single-futures share
- Commodity soft market
Commodity trading began in Japan in the 18th century with trade in rice and silk, and also in the Netherlands with tulip bulbs. Trade in the US began in the mid-19th century, when the central wheat market was established and the market was created for farmers to bring their commodities and sell them either for immediate delivery (also called spot or cash markets) or for forward delivery. This forward contract is a personal contract between the buyer and the seller and becomes the forerunner of the futures traded futures contract today. Although trading contracts begin with traditional commodities such as grains, meat and livestock, foreign exchange trading has expanded to include metals, energy, currency and currency indices, equities and equity indices, government interest rates and personal interest rates.
Exchange
The contract on financial instruments was introduced in 1970 by the Chicago Mercantile Exchange (CME) and the instrument became very successful and quickly outpaced commodity futures in terms of trade volume and global accessibility to the market. This innovation led to the introduction of many new futures exchanges around the world, such as the London International Financial Futures Exchange in 1982 (now Euronext.liffe), Deutsche TerminbÃÆ'¶rse (now Eurex) and Tokyo Commodity Exchange (TOCOM). Today, there are over 90 futures and futures exchange trading options around the world to include:
- CME Group (formerly CBOT and CME) - Currencies, Various Interest Rate Derivatives (including US Bonds); Agriculture (Corn, Soybean, Soya Products, Wheat, Pork, Livestock, Butter, Milk); Index (Dow Jones Industrial Average, NASDAQ Composite, S & P 500, etc.); Metals (Gold, Silver)
- The Intercontinental Exchange (ICE Futures Europe) - formerly International Crude Oil Trading trades energy including crude oil, heating oil, diesel oil, refined petroleum products, electric power, coal, natural gas and emissions
- NYSE Euronext - which absorbs Euronext where London International Financial Futures and Options Exchange or LIFFE (pronounced 'LIFE') are merged. (LIFFE has taken over the London Commodities Exchange ("LCE") in 1996) - softs: grains and meat. The market is not active in Baltic Exchange shipments. Futures indexes include EURIBOR index, FTSE 100, CAC 40, AEX.
- South African Futures Exchange - SAFEX
- Sydney Futures Exchange
- Tokyo Stock Exchange TSE (JGB Futures, TOPIX Futures)
- Tokyo Commodity Exchange TOCOM
- Tokyo Financial Exchange - TFX - (Futures Euroyen, Overnight CallRate Futures, SpotNext RepoRate Futures)
- Osaka OSE Stock Exchange (Nikkei Futures, RNP Futures)
- London Metal Exchange - metals: copper, aluminum, lead, zinc, nickel, tin and steel
- Intercontinental Exchange (ICE Futures US) - formerly New York Trade Council - soft: cocoa, coffee, cotton, orange juice, sugar
- New York Mercantile Exchange (CME Group) - energy and metals: crude oil, gasoline, heating oil, natural gas, coal, propane, gold, silver, platinum, copper, aluminum, and palladium
- Dubai Mercantile Exchange
- JFX Jakarta Futures Exchange
- The Montreal Exchange (MX) (owned by TMX Group) is also known in France as Bourse De Montreal: Cash Flow and Derivatives: Canadian 90 Days Banker's' Acceptance Futures, Futures of Canadian government bonds, S & P/TSX 60 Futures Index , and various other Futures Index
- Korean Exchange - KRX
- Singapore Exchange - SGX - which combines the Singapore International Monetary Exchange (SIMEX)
- ROFEX - Rosario (Argentina) Futures Exchange
- NCDEX - National Commodity and Derivatives Exchange, India
- EverMarkets Exchange (EMX) - is scheduled to launch in late 2018 - global currencies, equities, commodities and cryptocurrencies
- FEX Global - Australian Financial and Energy Exchange
Code
Most futures contract codes are five characters long. The first two characters identify the type of contract, the third character identifies the month and the last two characters identify the year.
Kode kontrak berjangka ketiga (bulan) adalah
- Januari = F
- Februari = G
- Maret = H
- April = J
- Mei = K
- Juni = M
- Juli = N
- Agustus = Q
- September = U
- Oktober = V
- November = X
- December = Z
Example: CLX14 is contract Crude Oil (CL), November (X) 2014 (14).
Futures trader
Traders are traditionally placed in one of two groups: hedgers, who have an interest in the underlying asset (which may include intangibles such as index or interest rates) and seek to Hedgers
Hedgers typically include commodity producers and consumers or owners of assets or assets that are affected by several factors such as the interest rate.
For example, in traditional commodity markets, farmers often sell futures contracts for crops and livestock they produce to guarantee a certain price, making it easier for them to plan. Similarly, livestock producers often purchase futures to cover their feed costs, so they can plan fixed costs for feed. In the modern (financial) market, the "producer" of interest rate swaps or equity derivative products will use financial futures or equity futures indexes to reduce or eliminate risk on swaps.
Those who buy or sell commodity futures should be careful. If a company buys a contract hedge against a price increase, but in reality commodity market prices are substantially lower upon delivery, they may find themselves very uncompetitive (eg see: VeraSun Energy).
Speculator
Speculators are usually divided into three categories: merchant positions, day traders, and swing traders, although many types of hybrids and unique styles exist. With so many investors coming into the futures market in recent years, controversy has been increasing as to whether speculators are responsible for increased volatility in commodities such as oil, and experts are divided over the issue.
Examples that have hedging and speculative understandings involve mutual funds or accounts that are managed separately whose investment objective is to track the performance of stock indices such as S & amp; P 500. Portfolio managers often "equalize" cash inflows in an easy and cost-effective way by investing in (long open) stock index futures S & amp; P 500. This increases the portfolio's exposure to an index consistent with the investment objectives of funds or accounts without having to buy the exact proportions of each of the 500 individual stocks first. It also maintains balanced diversification, maintains a higher level of market-invested percentage of assets and helps reduce tracking errors in fund/account performance. When economically feasible (the number of efficient stocks from each individual position in the fund or account can be purchased), the portfolio manager can close the contract and make purchases of each individual share.
The futures market social utility is considered primarily in risk transfers, and increased liquidity between traders with various risks and time preferences, from hedger to speculator, for example.
Options on futures
In many cases, options are traded on futures, sometimes called "futures options". A put is option to sell futures contracts, and calls are option to buy futures contracts. For both, the strike option price is the specified futures price at which the future is traded if the option is executed. Futures are often used because they are delta single instruments. Calls and options on futures can be priced the same as those on traded assets using the extension of the Black-Scholes formula, the Black-Scholes model for futures. For options on futures, where premiums are not due until canceled, positions are usually referred to as fution, because they act like an option, however, they settle like futures.
Investors can take on the role of seller of option (or "author") or buyer of option. Seller options are generally seen as taking more risks because they are contractually required to take the opposite term positions if the option buyer exercises their rights to the futures positions specified in the options. The price of an option is determined by the principles of supply and demand and consists of an option premium, or a price paid to the seller of an option to offer options and take risks.
Term contract rules
All futures transactions in the United States are governed by the Commodity Futures Trading Commission (CFTC), an independent body of the United States government. The Commission has the right to grant penalties and other penalties for individuals or companies that violate any regulation. Although under the law, the commission regulates all transactions, each exchange may have its own rules, and under contracts may benefit companies for different matters or extend penalties incurred by the CFTC.
CFTC publishes a weekly report detailing the open interest of market participants for each market segment with more than 20 participants. These reports are released every Friday (including data from the previous Tuesday) and contain open and reportable open interest by open interest and commercial and non-commercial interest. This type of report is referred to as the 'Merchant Commitment Report', COT-Report or COTR only.
Definition of futures contract
Following BjÃÆ'¶rk we provide a definition of a futures contract . We explain the futures contract with the delivery of goods J at that time T:
- Available in the quoted market F (t, T) , known as the term price at time t for delivery J at T.
- The price includes a zero-term contract.
- During any time interval , the handle accepts the amount of . (this reflects a direct mark on the market)
- When T , the holder pays F (T, T) and is entitled to receive J. Note that F (T, T) should be the spot price of J at T.
Forwarding a contract
A closely related contract is a forward contract. Progress is like futures in determining exchange rates for a certain price on a certain date in the future. However, forward is not traded on the exchange and thus has no temporary partial payments as it marks to the market. There is also no standard contract, as in the stock exchange.
Unlike options, both parties of the futures contract must fulfill the contract on the date of delivery. The seller delivers the underlying asset to the buyer, or, if it is a completed cash futures contract, then cash is transferred from a futures trader who suffers a loss to the person making the profit. To exit the commitments prior to the settlement date, holders of futures positions may close their contractual obligations by taking the opposite position on other futures contracts on the same asset and settlement date. The difference in futures price is profit or loss.
Futures versus forward
Although forward and forward contracts are contracts to deliver assets on a future date at a pre-arranged price, they differ in two ways:
- Futures are swap , while forward is trading over-the-counter.
- Thus futures is standardized and faces exchange , when forwarding customized and facing non-exchange counterparty .
- Futures are marginal, while not.
- Thus, the future has a less significant credit risk, and has different funding.
Going forward has a credit risk, but futures are not due to the guarantee of clearing against the risk of default by taking both sides of the trade and marking to market their position every night. The forward is basically unregulated, while futures contracts are set at the federal government level.
The Future Industry Association (FIA) estimates that 6.97 billion futures contracts traded in 2007, up nearly 32% compared to 2006 figures.
Exchange versus OTC
Futures are always traded on the exchange, while in the future always trade over-the-counter, or can only be a contract signed between two parties. Therefore:
- Futures are highly standardized, traded on the exchange, while the forward can be unique, over-the-counter.
- In terms of physical delivery, forward contracts specify who to make the delivery. Contracting parties for delivery on futures contracts are selected by the clearing house.
Margining
Futures are marginalized daily to the daily spot price of forward with a mutually agreed upon delivery price and underlying asset (based on mark to market ).
The future does not have a standard. They can trade only on settlement date. It is more common for parties to agree on the truth, for example, every quarter. The fact that the future is not marginalized every day means that, because of the underlying asset price movement, substantial differences can occur between the forwarding price and the settlement price and, in any case, unrealized gain (loss) can build up.
Again, this is different from futures that get trully-ups usually daily with future market value comparisons with the guarantee of securing contracts to stay in line with the margin requirements of the broker. This is true by "losers" who provide additional guarantees; so if the buyer of the contract is impaired, the shortfall margin or variation will usually be sustained by the investor's cable or saving additional money in the brokerage account.
However, in the future, the spread of the exchange rate is not straightened out regularly but, on the contrary, it accumulates as an unrealized profit (loss) depending on which side of the trade is being discussed. This means that all unrealized gains (losses) are realized at the time of delivery (or as is usually the case, the time the contract closes before expiration) - assuming the parties have to transact with the underlying spot spot currency to facilitate receipt/delivery.
The result is that in the future it has a higher credit risk than futures, and that funding is charged differently.
In many cases involving institutional investors, the daily variation of margin solving guidelines for futures calls for real money movements just above an insignificant amount to avoid cabling back and forth a small amount of cash. The threshold amount for daily margin futures varies for institutional investors often $ 1,000.
However, the situation to go forward, where it does not happen every day that happens in turn creates a credit risk to advance, but not so much for futures. Put simply, the risk of forward contracts is that the supplier will not be able to deliver the referenced asset, or that the buyer will not be able to pay it on the delivery date or the date on which the opening party closes the contract.
Term marginalization eliminates many of these credit risks by forcing holders to update each day to an equivalent price bought upfront that day. This means that there will usually be very little extra money to be paid on the last day to complete futures contracts: only last day's gains or losses, not gains or losses during the contract period.
In addition, the risk of failure of a daily settlement is borne by the exchange, not as an individual party, further limiting future credit risk.
Example: Consider a futures contract at a price of $ 100: Let's say on the 50th day, a futures contract with a $ 100 shipping price (on the same base asset as the future) costs $ 88. On the 51st day, The futures are worth $ 90. This means that a "mark-to-market" calculation will require a one-sided future holder to pay $ 2 on the 51st day to track forward price changes ("post $ 2 margin"). This money goes in, through margin accounts, to the holder of the other side of the future. That is, the losers send money to other parties.
However, the forward holder may not pay anything until the completion of the last day, potentially building a great balance; this can be reflected in the mark with credit risk allowance. Thus, except for the small effect of convexity bias (due to earn or pay interest on margin), futures and forward with the same shipping price result in the same total loss or profit, but futures holders lose/increase in daily increases tracking daily daily price changes , while the spot forward price merges with the settlement price. Thus, while under mark to market accounting, for both assets, gains or losses arise during the holding period; for the future, these gains or losses are realized on a daily basis, whereas for futures contracts, gains or losses remain unrealized.
Note that, due to the dependency of the funding path, futures contracts are not, strictly speaking, a derivative of European style: the total profit or loss of trade depends not only on the underlying value of the asset in expiration but also on the street price. This difference is generally quite small.
With an exchangeable future, clearing houses will intervene in every trade. Thus there is no default risk of counterparty. The only risk is that the clearing house fails (eg becomes bankrupt), which is considered very unlikely.
Further reading
- National Futures Association (2006). Education Guide for Futures Trading and Options in Futures Contract . Chicago, Illinois.
See also
- 1256 Contract
- Commodity Exchange Law
- Contract for subsequent sale
- Derivation of goods
- BBM price risk management
- Grain Futures Act
- List of financial topics
- List of traded commodities
- London Metal Exchange
- Oil storage trading
- Onion Futures Act
- Market predictions
- Seasonal spread trade
Note
References
- Redhead, Keith (1997). Financial Derivatives: Introduction to Futures, Forward, Options and Swaps . London: Prentice-Hall. ISBN: 0-13-241399-X.
- Lioui, Abraham; Poncet, Patrice (2005). Dynamic Asset Allocation with Future and Futures . New York: Springer. ISBNÃ, 0-387-24107-8.
- Valdez, Steven (2000). Introduction to Global Financial Markets (3rd ed.). Basingstoke, Hampshire: Macmillan Press. ISBNÃ, 0-333-76447-1.
- Arditti, Fred D. (1996). Derivatives: Comprehensive Resources for Options, Futures Contracts, Interest Rate Swaps, and Mortgage Securities . Boston: Harvard Business School Press. ISBN: 0-87584-560-6.
AS. Stock and futures regulator
- Chicago Board of Trade, now part of the CME Group
- Chicago Mercantile Exchange, now part of the CME Group
- Commodity Futures Trading Commission
- National Futures Association
- Kansas City Trade Council
- New York Trading Council now ICE
- The New York Mercantile Exchange, now part of the CME Group
- Minneapolis Grain Exchange
External links
- Understanding Derivatives: Markets and Infrastructure Federal Reserve Bank of Chicago, Financial Markets Group
Source of the article : Wikipedia
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