Futures and forwards

Options, which we discussed in the previous chapter, are one type of derivative; futures and forwards, which we discuss in this chapter, are two others. These markets are rather complex and definitely not for inexperienced investors. Still, the essentials of how futures and forwards are priced, and how they can be used for hedging and speculating, are not difficult to understand. These are, precisely, the focus of this chapter.

Basic definitions

You’ve probably done it many times. You go into a shop and that hot CD or book has already flown off the shelves. So what ...

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