Trading Issues and Basics of Forward and Future Contracts: DB2
Derivatives provide investors with the opportunity to create wealth in the future. Besides being very secure investments, these financial instruments provide investing firms with a good mechanism of hedging multiple currency transactions. Many companies are now embracing derivatives as one way of securing their future financial stability and strengthening the company’s hedging policy on currencies.
Difference between contango and backwardation markets
A contango market is one where prices of futures are set higher than the expected future prices. Therefore, the prices of futures in this kind of market decline gradually until they reach the expected price level just before the date of delivery. On the ...