Modeling Futures Contracts

  • Robert Mamayev


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.


Future Contract Variable Assignment Contract Type Business Rule Physical Asset 
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Copyright information

© Robert Mamayev 2013

Authors and Affiliations

  • Robert Mamayev
    • 1
  1. 1.NYUS

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