5
Futures Contracts
LEARNING OBJECTIVES
After completing this chapter, you will be able to answer the following questions:
What is a futures contract?
What are the differences between a futures contract and a forward contract?
What is the role of a clearing corporation in futures exchanges?
What is meant by margin and marking-to-market in futures markets?
How to understand futures quotes?
How can one arbitrage between futures markets and spot markets?
How are futures contracts traded?
BOX 5.1 The Birth of Currency Futures Markets
In November 1967, Milton Friedman, a professor, believed that the Bank of England was likely to devalue the British pound. He approached a Chicago bank to borrow money in order to make gains when the value ...
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