CHAPTER 17 Futures Markets
Introduction
A forward contract is an agreement between two parties to trade a specific asset at a future date with the terms and price agreed upon today. A futures contract, in turn, is a “marketable” forward contract, with marketability provided through futures exchanges that list hundreds of standardized contracts, establish trading rules, and provide for clearinghouses to guarantee and intermediate contracts. In contrast, forward contracts are provided by financial institutions and dealers, are less standardized and more tailor-made, are usually held to maturity, and unlike futures, they often do not require initial or maintenance margins. Both forward and futures contracts are similar to option contracts in ...
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