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Derivatives and Risk Management by Ranganatham Ranganatham, Madhumathi Madhumathi

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chapter 4

Forward and Futures Instruments

LEARNING OBJECTIVES

After reading this chapter, you will be able to

  • Understand and define forward contracts, futures contracts and forward rate agreements
  • Identify the differences between forward and futures contracts
  • Learn to apply these derivative instruments for hedging against risks
CHAPTER OUTLINE

4.1 Introduction

4.2 Forwards

4.3 Forward Rate Agreements

4.4 Futures

4.5 Difference between Forwards and Futures Instruments

4.6 Futures Instruments for Asset Allocation—Security Futures

4.7 Futures as Portfolio Insurance—Index Futures

4.8 Price Discovery in the Futures Market

THE SITUATION

Modern Automobiles has borrowed US$50 million for its expansion plan. It has also signed a MOU with a US-based ...

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