Futures Markets and Hedging
Free GARP FRM Part I lesson in Financial Markets and Products. 22 min read, ~3,254 words.
Futures are exchange-traded forwards with standardized terms, daily mark-to-market, and central clearing; forwards settle once at maturity and carry full counterparty credit risk. Convergence: at delivery the futures price converges to spot, otherwise arbitrageurs take riskless profit. Basis = spot − futures. Basis risk is the variability in basis between...
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- Example 1
- Example 2
- Common Mistakes
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