FMP 7. Futures Markets

Learning Objectives

1) Define and describe the key features and specifications of a futures contract, including the underlying asset, the contract price and size, trading volume, open interest, delivery, and limits.

2) Explain the convergence of futures and spot prices.

3) Describe the role of an exchange in futures transactions.

4) Explain the differences between a normal and inverted futures market.

5) Describe the mechanics of the delivery process and contrast it with cash settlement.

6) Describe and compare different trading order types.

7) Describe the application of marking to market and hedge accounting for futures.

8) Compare and contrast forward and futures contracts.