Futures Account Agreement

This relationship can be changed for storage costs u, dividend or income yields q, and convenience yields y. Storage fees are the costs associated with storing a commodity to sell it at the futures price. Investors who sell the asset at the spot price for an arbitrage futures price earn the storage fees they would have paid to store the asset in order to sell it at the futures price. Convenience returns are the benefits of holding an asset for sale at the futures price, beyond the cash received from the sale. Among these benefits could be the ability to meet unexpected demand or use the facility as inputs in production. [12] Investors pay or forego the commodity return when selling at the spot price because they forego these benefits. Such a relationship can be summarized as follows: in finance, a futures contract (sometimes called futures contracts) is a standardized legal agreement to buy or sell at a set price at a given time between parties who do not know each other. The liquidated asset is usually a commodity or financial instrument. The price set in advance, for which the parties buy and sell the asset, is called the forward price. The time indicated in the future, during delivery and payment, is called the delivery date. As it is an underlying function, a futures contract is a derivative. In order to minimize counterparty risk for traders, trades executed on regulated futures exchanges are guaranteed by a clearing house. The clearing house becomes the buyer for each seller and the seller for each buyer, so that in the event of default of the counterparty, the risk of loss takes over the risk of loss.

This allows merchants to carry out transactions without performing due diligence with their counterparty. The result is that wards have a higher credit risk than futures and funding is calculated differently. In order to reduce the risk of failure, the product is placed on the market on a daily basis, with the difference between the initially agreed price and the actual daily futures price being revalued daily. This is sometimes called a margin of variation where the wallet draws money from the losing party`s Margin account and pays to the other party to ensure that the correct loss or gain is reflected daily. If the Margin account signs a value determined by the Exchange, a margin call is made and the account holder must complete the Margin account. However, a front cardholder cannot pay until the settlement of the last day, which could be a significant credit; This can be reflected in the brand through risk prevention. Beyond the tiny effects of convexity distortion (due to the loss or payment of interest on the margin), futures and forwards, at equal delivery prices, result in the same total loss or profit, but futures holders experience this loss/profit in daily increments that follow the daily price changes of the attacker, while the attacker`s spot price converges to the billing price. Thus, for both assets, the profit or loss is recorded during the holding period, while the mark-to-market accounting is recorded in marks-to-market; in the case of a futures contract, this profit or loss is realized daily, while in the case of a futures contract, the profit or loss is not realized until expiration. Although futures are oriented towards a future date, their main purpose is to reduce the risk of default by one of the parties in the meantime.. .

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