Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
1Activity
P. 1
Analysis on Future Contract Price of Sugar

Analysis on Future Contract Price of Sugar

Ratings: (0)|Views: 14 |Likes:
Published by Mahmudul Quader



In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties -- the buyer hopes or expects that the asset price is going to increase, while the seller hopes or expects that it will decrease. Note that the contract itself costs nothing to enter; the buy/sell terminology is a linguistic convenience reflecting the position each party is taking (long or short).

While the futures contract specifies a trade taking place in the future, the purpose of the futures exchange institution is to act as intermediary and minimize the risk of default by either party. Thus the exchange requires both parties to put up an initial amount of cash, the margin. Additionally, since the futures price will generally change daily, the difference in the prior agreed-upon price and the daily futures price is settled daily also. The exchange will draw money out of one party's margin account and put it into the other's so that each party has the appropriate daily loss or profit. If the margin account goes below a certain value, then a margin call is made and the account owner must replenish the margin account. This process is known as marking to market. Thus on the delivery date, the amount exchanged is not the specified price on the contract but the spot value (since any gain or loss has already been previously settled by marking to market)



In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset in the future, the "seller" of the contract, is said to be "short". The terminology reflects the expectations of the parties -- the buyer hopes or expects that the asset price is going to increase, while the seller hopes or expects that it will decrease. Note that the contract itself costs nothing to enter; the buy/sell terminology is a linguistic convenience reflecting the position each party is taking (long or short).

While the futures contract specifies a trade taking place in the future, the purpose of the futures exchange institution is to act as intermediary and minimize the risk of default by either party. Thus the exchange requires both parties to put up an initial amount of cash, the margin. Additionally, since the futures price will generally change daily, the difference in the prior agreed-upon price and the daily futures price is settled daily also. The exchange will draw money out of one party's margin account and put it into the other's so that each party has the appropriate daily loss or profit. If the margin account goes below a certain value, then a margin call is made and the account owner must replenish the margin account. This process is known as marking to market. Thus on the delivery date, the amount exchanged is not the specified price on the contract but the spot value (since any gain or loss has already been previously settled by marking to market)

More info:

Published by: Mahmudul Quader on Nov 22, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less

09/17/2013

pdf

text

original

 
 
Blbc}zmz fl Iuxute Jflxtbjx ^tmje fiZukbt
B ^tfgejx Te~ftx Ift
IML
 ‚
5857 F~xmflz# Iuxute ) Fxoet Hetmybxmyez
^tezelxeh Xf
7 Ht, Zbt{bt Uhhml Bo`bh
^te~bteh D}
7Z}eh @bo`uhuc Rubhet 7 2>45>;5@h,Ibzm Uhhml7 2>45>28Zbx}bgmx Hobt 7 2>25>5=@h, Ibmzbc @bob`ffh7 2>:5>95]uzuiuc Obr7 >:2>24?Hbxe fi Zud`mzzmfl7 45
xo
Guc}# 22Mlhe~elhelx Ulmyetzmx} Dblkcbhezo# Jomxxbkflk /MUD-
 
 
[fta Dtebahf{l Zxtujxute
Hbxe Tez~flzmdmcmxmez @e`det lb`e4;
x
Gule
 ‚ 
 8
xo
Guc}@btaex @flmxftmlk# Hbxb jfccejxmfl blhMlxet~texbxmfl ) GuzxmimjbxmflZ}eh @bo`uhuc Rubhet@btkml Xbdce ) Lex K&C Jbcjucbxmfl @h, Ibzm Uhhml8
x
Guc}
 ‚ 
 22
xo
Guc}@btaex @flmxftmlk ]uzuiuc Ofr@btkml Xbdce @h, Ibmzbc @bo`ffhLex K&C Jbcjucbxmfl Zbx}bgmx Hobt22
x
Guc}
 ‚ 
 2?
xo
Guc}@btkml Xbdce Z}eh @bo`uhuc RubhetLex K&C Jbcjucbxmfl @h, Ibzm Uhhml2?
x
Guc}
 ‚ 
 44
lh
Guc}@btkml Xbdce @h, Ibmzbc @bo`ffhLex K&C Jbcjucbxmfl Zbx}bgmx Hobt
 
 
BJALF[CEHKE@ELX
 
Imtzx fi bcc# {e te`e`det bc`mkox} Bccbo ift kmymlk uz xoe f~~ftxulmx} blhzxtelkxo xf jbtt} fl xomz xoezmz,
[e e~tezz fut oebtxiecx ktbxmxuhe# hee~ezx tekbth xf fut tez~ejxeh jfutze mlzxtujxft Ht,Zbt{bt Uhhml Bo`bh# Zjoffc fi Duzmlezz# Mlhe~elhelx Ulmyetzmx}# Dblkcbhezo# ift omz oec~iucbhymje blh jflxmlufuz eljfutbke`elx xotfukofux xoe ~tfktezz fi xomz {fta# {mxofux {omjo xoe{fta jfuch lfx obye deel jf`~cexeh,

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->