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jeffrey-manning
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Futures, Options & Money Market Hedges
1. Futures Contracts compared to Forward Contracts2. Currency Options > Options Vocabulary
> Options Dynamics> Options vs. Forwards & Futures
3. Money Market Hedges> On Balance Sheet vs. Off Balance Sheet Derivatives> Deposits (Depos) and Borrowing
Futures Contracts compared to Forward Contracts(A)
1. Trading > Futures traded at Futures Exchange (IMM)
> Forwards traded by telephone2. Contract Size
> Futures Contract size is fixed> Forward Contract size is any amount
3. Delivery Date> Futures can be delivered only a few days a year> Forwards can be delivered any business day
Futures Contracts Compared to Forward Contracts (B)
4. Margins> Futures Exchanges require clients to post a margin as collateral> No margins or collateral required to do forward contracts
5. Credit Risk>The Exchange’s Clearing House is the counterparty for all futures contracts> The credit risk is borne by each party to a forward contract
6. Quotes> Futures quotes use the dollar as the reference currency> Forward Contract quotes follow FX Market conventions