Question

7 points Q1. Which of the following are characteristics of forward and/or futures contracts or neither? Forward Contract Futures Contract A contract relating to a transaction at a future date. Require traders to provide margin. Are traded over the counter. Are guaranteed by a clearing house. Have asymmetric pay-offs. Are usually standardised contracts. Profit or loss is realised only on maturity.

Answer 1

Detailed answer is provided in the hand written notes below.

s X by a Х a)x) Х w X Answer to Question for word futures Particulars contract contact (1) A contract relating to a sansaction at a future date (ii) Requires traders to provide morgin х (1) Are traded over the counter (iv) are guaranteed cleaning house (v) Have asymetric pay-offs Are usually standardised contacts (vii) Profit or loss is realised only X maturity * Explanation :- (1) Both the forward consact and future contacts contacts transaction at a future date which determined on entered into conbacts earuer, Future contacts standardised forward contract. (ii) and (iii) forward contacts are an agreement between or sell an assef and two partes to these over the counter the OTC while future standardized contacts baded future exchange ie they are exchange traded. so, future contacts requires margin for trading in exchange but forward contacts does not require margin. are relating to are are buy que 1 done contacts are