Futures Markets and Hedging

Free GARP FRM Part I lesson in Financial Markets and Products. 22 min read, ~3,293 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...