What are the key differences between a forward and a futures contract?
What are the key differences between a forward and a futures contract?
Homework Answers
Forward contract is a type of contract in which the two parties agree to buy and sell the Asset at a specified date in the future.
In the future contract ,the agreement is between the two parties to exchange the Asset for a fixed price at a future specified date .
Since there is no upper watching authority in forward contract so the risk is very high in forward contract as compared to future contract.
size of contract depends on the contract terms in forward contract but in future contract size of contract is fixed.
liquidity in forward contract is low as compared to future contract
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What are the key differences between a forward and a futures
contract?
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What are the differences between futures and forward markets in terms of counterparty credit risk (3pts),...
What are the differences between futures and forward markets in terms of counterparty credit risk (3pts), contract terms (3pts), delivery expected (3pts), timing flexibility (3pts), regulation (3pts), liquidity requirements (3pts), and capital requirements (2pts)?
a)What are the main differences between forward/futures vs. options as a hedging tool? b) Assume that...
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Essay Questions (20 points each - Explain in detail) 1. What are the differences between futures...
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5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor...
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Essay Questions (20 points each - Explain in detail) 1. What are the differences between futures and forward markets in terms of counterparty credit risk (3pts), contract terms (3pts). delivery expected (3pts), timing flexibility (3pts), regulation (3pts), liquidity requirements (3pts), and capital requirements (2pts)? Explain in details.
5. (a) Explain the differences between a forward contract and an option. [2] (b) An investor has taken a short position in a forward contract. If Sy is the price of the underlying stock at maturity and K is the strike, what is the payoff for the investor? Does the investor expect the underlying stock price to increase or decrease? Explain your answer. (2) (c) (i) An investor has just taken a short position in a 6-month forward contract on...
QUESTION 1 a) What is a derivative security? b) What are the differences among a spot contract, a forward contract, and a futures contract? c) What is an option? How does an option differ from a forward or futures contract? What is the difference between a call option and put option? d) What is a swap? What is the difference between an interest rate swap and a currency swap? e) Which party is the swap buyer and which is the...
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