1. FINANCIAL DERIVATIVES/SNSCT/MBA
Futures
A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price.
It is a standardized exchange-traded contracts. Some important features of futures contracts are;
Standardization – certain std. specification (Quantity of the asset, quality of the asset, the date and month of delivery, location of settlement, etc.,)
Clearing House – It gives the guarantee for the performance of the parties to each transaction. Thus, the clearing house is the counter party to every contract.
Settlement Price – future contracts are performed through a particular exchange, so at the close of the day of trading is marked to market.
FINANCIAL DERIVATIVES/SNSCT/MBA

2. FINANCIAL DERIVATIVES/SNSCT/MBA
Futures
Daily Settlement and margin –
When a person enters into a contract, he is required to deposit funds with the broker, Which is called as margin.
minimum margin required for different assets
the broker can set higher margin limits for his clients which depend upon the credit-worthiness of the clients.
The basic objective to minimize the risk of failure
FINANCIAL DERIVATIVES/SNSCT/MBA

3. FINANCIAL DERIVATIVES/SNSCT/MBA
Futures
Cash settlement: the cash price at expiration date.
Delivery: The futures contracts are executed on the expiry date. The counter parties with short position are obligated to make delivery to the exchange, whereas the exchange is obligated to make delivery to the longs.
Regulation: The important difference between futures and forward markets is that the futures contracts are regulated through an exchange.
FINANCIAL DERIVATIVES/SNSCT/MBA

4. FINANCIAL DERIVATIVES/SNSCT/MBA
Relaxes
FINANCIAL DERIVATIVES/SNSCT/MBA

5. FINANCIAL DERIVATIVES/SNSCT/MBA
Long & Short position
Long & Short position
FINANCIAL DERIVATIVES/SNSCT/MBA