Textbook Notes (362,879)
Canada (158,081)
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MGFC10H3 (13)
Derek Chau (13)
Chapter 26

Chapter 26 Notes

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University of Toronto Scarborough
Derek Chau

Chapter 26 Derivatives and Hedging Risk Notes261 Forward Contractsforward contractan arrangement calling for future delivery of an asset at an agreedupon pricetaking deliveryrefers to the buyers actually assuming possession from the seller of the asset agreed upon in forward contractdeliverable instrumentthe asset in a forward contract that will be delivered in the future at an agreedupon pricemaking deliveryrefers to the sellers actually turning over to the buyer the asset agreed upon in a forward contractcash transactiona transaction where exchange is immediate as contrasted to a forward contract which calls for future delivery of an asset at an agreedupon price262 Future Contactsfutures contractobliges traders to purchase or sell an asset at an agreedupon price on a specified future date the long position is held by the trader who commits to purchase the short position is held by the trader who commits to sell futures differ from forward contracts in their standardization exchange trading margin requirements and daily settling marking to marketa futures contract differs somewhat from a forward contract1the seller can choose to deliver on any day during the delivery month2futures contracts are traded on an exchange whereas forward contracts are generally traded off an exchange3the pries of futures contracts are mark
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