Chapter21: Risk Management
Section: Chapter Questions
Problem 6QTD
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Question
What is the difference between the futures price and the value of the futures contract?
Expert Solution
Step 1
Futures contracts are derivative instruments in which the participants agree to buy or sell an underlying asset (or a commodity) at a pre-fixed price and at a specified time in the future.
Step 2
Futures price:
Futures price of an underlying asset is the price at which the participants agree to buy or sell an underlying asset (or a commodity) at sometime in a future date.
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