ECON372 Study Guide - Midterm Guide: Spot Contract, Futures Contract, Open Outcry
5 Aug 2016
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Futures contract an agreement to buy or sell an asset at a certain time in the future for a certain price, allows both parties to eliminate the risk it faces because of the uncertain future price. Futures exchange allows people who want to buy or sell assets in the future to trade with each other. Futures price price at which the futures contract is agreed on, for assets to be delivered in the future. Spot price price for immediate or almost immediate asset delivery. Open-outcry system a system that involves traders physically meeting on the floor of the exchange (the trading pit), and using hand signals to indicate the trades they would like to carry out. Forward contracts same as futures contract with the exception that they are traded in the otc market. Forward contracts on foreign exchange are very popular and is used by most large banks. Over-the-counter market alternative to exchanges, trades are done over the phone.
