Flashcards in a describe the characteristics of futures contracts; Deck (2)
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1
Q
Future contract characteristics
A
Definition: “ a futures contract is an agreement between two parties in which one party, the buyer, agrees to buy from the other party, the seller, an underlying asset or other derivative, at a future date at a price agreed on today.”
-Contract trades in market every day and price changes on new info.
The exchange establishes everything, except the price (tat is established by the two parties)
Liquid - trades secondary post creation
2
Q
Marked to Market Daily
A
“gains and losses on each party’s position are credited and charged on a daily basis”
“equivalent to terminating a contract at the end of each day and reopening it the next day at that settlement price”