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  • Derivatives in IPM: Oneeza Cheema Ahmad Waqas Dar Haider Bin Tariq

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    Ahmad Waqas Dar
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    Futures contracts were designed to address the problems with forwards contracts by making them standardized and traded on exchanges, which provides more liquidity compared to over-the-counter forwards. Futures contracts are standardized with respect to contract terms, underlying assets, delivery dates and locations, and contract sizes. They require margin payments and are marked to market daily, whereas forwards are customized bilateral contracts that do not involve margin payments.

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    Futures contracts were designed to address the problems with forwards contracts by making them standardized and traded on exchanges, which provides more liquidity compared to over-the-counter forwards. Futures contracts are standardized with respect to contract terms, underlying assets, delivery dates and locations, and contract sizes. They require margin payments and are marked to market daily, whereas forwards are customized bilateral contracts that do not involve margin payments.

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    16 views5 pages

    Derivatives in IPM: Oneeza Cheema Ahmad Waqas Dar Haider Bin Tariq

    Uploaded by

    Ahmad Waqas Dar
    Futures contracts were designed to address the problems with forwards contracts by making them standardized and traded on exchanges, which provides more liquidity compared to over-the-counter forwards. Futures contracts are standardized with respect to contract terms, underlying assets, delivery dates and locations, and contract sizes. They require margin payments and are marked to market daily, whereas forwards are customized bilateral contracts that do not involve margin payments.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    DERIVATIVES IN

    IPM
    ONEEZA CHEEMA
    AHMAD WAQAS DAR
    HAIDER BIN TARIQ
    Futures were designed to address the problems of
    forwards

    Contract between two parties

    FUTURES IN
    PORTFOLIO Traded at proper exchanges

    Legally standardized

    Standardized items in a futures contract


    Futures Forwards

    Trade on an organized exchange OTC in nature

    Standardized contract terms Customised contract terms

    Hence more liquid Hence less liquid

    Requires margin payments No margin payment

    COMPARISON OF FUTURES AND FORWARDS


    Spot Price

    Futures Price

    Contract Cycle

    Expiry date

    FUTURE Size of contract

    TERMINOLOGIES Basis
    Carrying cost

    Initial Margin

    Marking to Market

    Maintenance Margin
    Who trades futures contracts ?

    Examples of Futures ; Southwest Airlines

    FUTURES MARKET IN COVID-19 PANDEMIC

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