The futures contract is a contract where the obligations are forward obligations .
The forward contract (or future ) is the first and simplest form of hedging.
It is a forward sale and purchase contract for an underlying . The first types of contract involved the exchange of raw materials and goods. The opening of the first commodity exchanges gave birth to organized markets. The techniques were then extended to currencies, interest rates and finally stock market indices, with the creation of financial instrument futures markets.
Definition of a forward contract
A futures contract is a contract where one of the two parties agrees to sell and the other to buy an economic quantity of a certain commodity (or of an economic quantity), the underlying asset, to a given price and an agreed expiration date. Depending on the underlying asset, the notion of purchase or sale is replaced by the notion of borrowing or lending.
Markets in which futures contracts are traded
A forward contract can be traded
– over-the-counter between two counterparties, this is referred to as straightforward or ” forward ” contracts
– on organized markets, we speak of ” futures “.
Futures contracts for financial instruments
The three main types of futures contracts for financial futures are classified according to the underlying assets.
– interest rate futures
– currency contracts
– stock market index contracts