标题: question about forward contracts [打印本页] 作者: dreampak 时间: 2011-7-11 19:19 标题: question about forward contracts
When a contract expires how can you realize a gain/loss on the underlying asset when the contract price is fixed??
For example, if the price at expiration of an asset is $110 and the forward contract was initiated at $105, and you are short (meaning you will sell the asset at expiration) how is it that you have a a $5 dollar loss on the forward contract and a $10 gain on the asset (so a net $5 gain) when you do not get to realize the gain on the asset since you have to deliver it for $105?????
I forgot to add that the asset was purchased at $100.作者: ryanlb 时间: 2011-7-11 19:19
From the long I see how the gain is in terms of opportunity costs. I suppose it is the same for the short. Hopefully I answered my own question......作者: maryli 时间: 2011-7-11 19:19
forward contract loses -5 b/c I am short and I initiated the short at 105 but the price went up to 110 so I lose.
asset gains $10 b/c I bought it at $100 and it went to $110
