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    Feature Contract

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    Tin Robiso
    Futures contracts, like forwards contracts, require the sale of a commodity at a future date but at a price decided currently. However, futures contracts are traded on a commodity exchange, making the exchange the intermediary and standardizing the contract terms, sizes, and expiration dates. Daily settlement of gains and losses also occurs to mitigate counterparty credit risk, unlike forwards where the buyer and seller directly enter into agreements.

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    Feature Contract

    Uploaded by

    Tin Robiso
    33 views1 page
    Futures contracts, like forwards contracts, require the sale of a commodity at a future date but at a price decided currently. However, futures contracts are traded on a commodity exchange, making the exchange the intermediary and standardizing the contract terms, sizes, and expiration dates. Daily settlement of gains and losses also occurs to mitigate counterparty credit risk, unlike forwards where the buyer and seller directly enter into agreements.

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    Futures contracts, like forwards contracts, require the sale of a commodity at a future date but at a price decided currently. However, futures contracts are traded on a commodity exchange, making the exchange the intermediary and standardizing the contract terms, sizes, and expiration dates. Daily settlement of gains and losses also occurs to mitigate counterparty credit risk, unlike forwards where the buyer and seller directly enter into agreements.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    33 views1 page

    Feature Contract

    Uploaded by

    Tin Robiso
    Futures contracts, like forwards contracts, require the sale of a commodity at a future date but at a price decided currently. However, futures contracts are traded on a commodity exchange, making the exchange the intermediary and standardizing the contract terms, sizes, and expiration dates. Daily settlement of gains and losses also occurs to mitigate counterparty credit risk, unlike forwards where the buyer and seller directly enter into agreements.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
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    Feature Contracts

    A futures contract is very similar to a forwards contract. The similarity lies in the fact that
    futures contracts also mandate the sale of commodity at a future data but at a price which is
    decided in the present.

    However, futures contracts are listed on the exchange. This means that the exchange is an
    intermediary. Hence, these contracts are of standard nature and the agreement cannot be
    modified in any way. Exchange contracts come in a pre-decided format, pre-decided sizes and
    have pre-decided expirations. Also, since these contracts are traded on the exchange they have
    to follow a daily settlement procedure meaning that any gains or losses realized on this contract
    on a given day have to be settled on that very day. This is done to negate the counterparty
    credit risk.

    An important point that needs to be mentioned is that in case of a futures contract, they buyer
    and seller do not enter into an agreement with one another. Rather both of them enter into an
    agreement with the exchange.

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