Reading 68: Derivative Markets and Instruments-LOS b 习题精选

A forward commitment is a legally binding promise to perform some action in the future and can involve a stock index or portfolio.

Forward commitments can be customized and could be written on some measure of inflation, but typically they are not. The volume of forward commitments, including forward contracts and futures contracts, on bonds, equities, and interest rates is in the many billions of dollars.

Forwards and futures are similar and serve similar needs. Both are considered types of financial derivatives in that payoffs depend on another financial instrument or asset. The primary difference is that forwards are designed for the needs of the particular parties entering the contract, where futures are standardized contracts.

A futures contract is a forward contract that has been highly standardized and closely specified.  As with a forward contract, a futures contract calls for the exchange of some good at a future date for cash, with the payment for the good to occur at the future delivery date.  The purchaser of the contract is to receive delivery of the good and pay for it, (here the oil wholesaler) while the seller of the contract promises to deliver the good and receive payment.  The payment price is determined at the initial time of the contract.

A futures contract is a forward contract that has been highly standardized and closely specified. As with a forward contract, a futures contract calls for the exchange of some good at a future date for cash, with the payment for the good to occur at the future delivery date. The purchaser of the contract is to receive delivery of the good and pay for it while the seller (here the wheat farmer) of the contract promises to deliver the good and receive payment. The payment price is determined at the initial time of the contract.