ECON372 Study Guide - Final Guide: Interest Rate Risk, Futures Exchange, Futures Contract
5 Aug 2016
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Document Summary
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. Allows people who want to buy or sell assets in the future to trade with each other. Price at which the futures contract is agreed on, for assets to be delivered in the future. Price for immediate or almost immediate asset delivery. 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. 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. Alternative to exchanges, trades are done over the phone.
