How does a futures contract differ from a forward contract?

Q: Describe the basis of Futures contracts and discuss the potential risks and rewards.

A: An agreement where there are two parties, say one is a buyer and another one is a seller decides to…

Q: What are Contingent Liabilities?  Give an example.  What are the factors that determine the reason…

A: A liability, the occurrence of which is uncertain that is it may or may not occur is known as a…

Q: What is a FUTURES CONTRACT and what are its key components

A: Derivatives are those securities, the value of which depends on another security. There are few…

Q: Distinguish between (2) spot and futures markets

A: A financial market is the market where financial assets are created and traded. Financial assets are…

Q: What are the main differences between options and warrant contracts and forward and futures…

A: The difference among options and warrant contract:

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: What is the difference between forward and futures contracts, focusing on the pros and cons of each

A: In certain ways future and forward deals are similar: both include the buying and selling of assets…

Q: What is the spread (i.e., difference) between futures price and spot price called? a) Convergence…

A: The futures price is an estimated price the investor expected in the future.  The spot price is a…

Q: Explain the main differences between futures contracts and forward contracts.

A: Solution- Future Contract-        A derivative may be a legal agreement to shop for or sell a…

Q: what is the Difference between derivatives and insurance contract

A: Derivatives and insurance contracts are both financial instruments used for managing risk, but they…

Q: How do fundamental securities differ from derivatives

A: Fundamental securities and derivatives are actively traded in financial markets. The differences…

Q: Define derivatives

A: In Finance there are derivative contracts that derive its value from the underlying asset. This…

Q: What advantage does hedging using money market rates have over using interest rate futures?

A: However, there are also some drawbacks to consider:Potential Lower Returns: Interest earned on money…

Q: What is the key difference between futures contracts and options?

A: Both futures contracts and options are derivative instruments. Their value depends on the value of…

Q: Explain what is meant by forward contracts and futures using examples. List the main advantages /…

A: An option offers the holder of it the right, and not the responsibility, to buy or to sell an asset…

Q: Explain what is meant by “initial margin” on a futures contract

A: A futures contract is a type of common financial agreement that specifies a future date and price at…

Q: What is margin requirement (for futures)?

A: Solution:- A Margin Requirement is the share of marginable securities that an investor should pay…

Q: How are derivatives recorded?

A: Derivatives:   Derivatives are some financial instruments which are meant for managing risk and…

Q: What is a swap? Describe the mechanics of a fixed-rate swap and a floating-rateswap.

A: SwapsAn agreement amongst 2 counterparties i.e parties, a financial institution for the exchange of…

Q: What is a futures contract?

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: How do forwards, futures, and swaps hedge risk?

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…