chapter 4

Forward and Futures Instruments


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

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


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