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Derivatives and Risk Management by Sundaram Janakiramanan

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4

Forward Contracts

LEARNING OBJECTIVES

After completing this chapter, you will be able to answer the following questions:

  • What are forward contracts?

  • How are forward contracts used?

  • How are commodity forward contracts priced?

  • What are currency forward contracts?

  • What are the uses of currency forward contracts?

  • How are currency forward contracts priced?

  • What is a forward rate agreement?

  • What are the uses of forward rate agreements?

BOX 4.1 India Introduces Electricity Forward Contracts

In India, there is a disparity in the power demands of different states and regions, which results in seasonal surpluses in some areas and deficits in some areas. This mismatch of demand and supply can be managed by bringing power industry participants ...

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