- This topic has 1 reply, 2 voices, and was last updated 5 years ago by
.
- Posts
Hello John,
I am confused with some points with future contract:
1.As BPP study text stated,’flexible close out date’ is one of the characteristics of future contract, but in Kaplan mock, ‘Forward contracts can be for any date but futures contracts can only be settled on particular dates.’ is a correct option.2.’Both forward exchange contracts and futures contracts fix the rate of exchange on a future currency transaction.’ is another correct option from the same question in the mock.
I know the forward contract is to lock( fix)the exchange rate whereas the future contract is to hedge the adverse movement by gaining from the future contract and net off the corresponding loss from the exchange market(or vice versa).
is that equal to fix the exchange rate?
could you explain this, thank you!regards.
1. The final settlement dates for futures are fixed (end of each of March, June, September, or December), however they are flexible in that the futures deal can be finished at any time until the last day of the future – by selling a future if it had been bought, or by buying a future if it had originally been sold.
2. I explain exactly how futures work (with an example) in my free lectures. Although appreciate that in Paper FM you cannot be asked for calculations on futures even though you are expected to know how they work.
- You must be logged in to reply to this topic.