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Modeling Futures Contracts

  • Robert Mamayev
Chapter

Abstract

Most of the modeling principles we learned in the last chapter are applicable to the subject of this chapter: futures contracts (aka futures). Futures share many features with forward contracts, but a fundamental difference between them is how each one approaches the risk factor. Forward contracts are risky, with the shadow of a default always looming. Futures contracts, on the other hand, are deemed to be less risky because they are traded on exchanges. Exchange-imposed rules buffer investors against some of the risk because they make default events less likely. Every major exchange has implemented a set of intricate rules that all concerned parties must follow and obey. Moreover, each exchange’s enforcement of these rules guarantees that a contract has a good chance of being honored by each contract participant.

Keywords

Future Contract Variable Assignment Contract Type Business Rule Physical Asset 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Copyright information

© Robert Mamayev 2013

Authors and Affiliations

  • Robert Mamayev
    • 1
  1. 1.NYUS

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