【中山大学431金融 罗斯 公司理财】Ch025.pdfVIP

Chapter 25: Derivatives and Hedging Risk 25.1 a. A forward contract is an arrangement calling for the future delivery of an asset at an agreed-upon price. b. A futures contract obliges traders to purchase or sell an asset at an agreed-upon 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 market). 25.2 1. Futures contracts are standardized and traded on exchanges, while forward contracts are tailor-made to suit the specific needs of two counterparties. The standardization of contracts increases the liquidity of futures markets in comparison to forward markets and also allows traders to enter into their positions with a certain degree of anonymity. 2. The holder of a futures contract is insulated from default risk due to clearing corporations and margin requirements. The owner of a forward contract has no guarantee that his counterparty will not default, and therefore forward holders must carefully evaluate each others’ credit risk before entering into a contract. 412 读万卷书 行万里路 3. Since futures positions are marked-to-market at the close of trading, gains and losses on futures positions are realized daily, while gains or losses on a forward contract are not realized until the delivery of the asset. 25.3 a. i. Since the futures price of wheat is $5.10 per bushel at the end of trading on March 18, the