Options
•
An options give the holder (firm) the right (not
the obligation) to buy or sell an asset in the future at an agreed upon price
today.
Showing posts with label Financial Derivatives. Show all posts
Showing posts with label Financial Derivatives. Show all posts
Difference between Forward Contract and Futures Contract
Forward Contract
• These are agreements where 1 party agrees to buy
a commodity at a specific price on a specific future date and the other party agrees to sell the
product.
•
Goods are actually delivered under forward
contracts.
•
Forward contract is a tailor made futures
contract that is not traded on a organized exchange.
• Unless both parties are morally and financially
strong, there is a danger that 1 party will default on the contract, especially
if the price of the commodity changes markedly
after the agreement is reached.
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