March 2002
Intermediate to advanced
176 pages
3h 48m
English
book
Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
by Jean Dermine, Youssef F. Bissada
Content preview from Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition
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Forward contracts
For many years, banks have used forward contracts to hedge a risk or to take a position.
A forward is an agreement between two parties to sell a financial instrument (a share, currency, bond) at a future date (the delivery date) at a predetermined price.
ExampleFor instance, let us imagine a contract signed in September between e-Bank and Alpha Bank: e-Bank agrees to buy a 3-month-to-maturity treasury bill next December at a price of 90 fixed today.
It is an off-balance sheet transaction as it is just an agreement between two parties. As discussed in Stage 1, it has no impact on assets and liabilities (the very small transaction ... |
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