Introduction to Futures and Forwards

Lindsey Matthews

“Derivatives” is a catch all term for a wide range financial products. In this series, Lindsey will cover what forwards and futures are and how to price a forward trade.

Derivatives and structured products

Overview

Derivatives is a catch all term for a wide range of financial products, including futures and options, interest rate swaps, oil options, FX forwards, equity swaps and credit default swaps. Forwards contracts can be used in circumstances where prices are uncertain, and thus traders lock in and hedge their risk. The calculation of the fair forward price is outlined below.

Key learning objectives:

What are forwards and futures contracts?
What is the formula for calculating the fair forward price?
What does the pricing of a 3 month forward NOT involve?

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Summary

Expert

Lindsey Matthews

Lindsey runs Perfordiant, an investment risk and performance consulting firm. He has worked in financial markets since 1992. Lindsey became an MD in fixed income and equities, ran a Risk function, and was on the management team of an Asset Management fintech business. Lindsey is now a Visiting Fellow at the Henley Business School, and resides on the board of CFA UK.