Hi Mike,
I am confused by something I read in the BPP study text about derivatives:
As one of the 3 characteristics it says: its value changes in response to the change in a specified interest rate, (etc...).
But then as a common example of a derivative it states 'forward contracts' which are defined as agreements to buy or sell an asset at a fixed price at a fixed future date.
How can the amount change depending on the specified rate and at the same time be fixed?
Could you shed some light on this please?
Many thanks!
I am confused by something I read in the BPP study text about derivatives:
As one of the 3 characteristics it says: its value changes in response to the change in a specified interest rate, (etc...).
But then as a common example of a derivative it states 'forward contracts' which are defined as agreements to buy or sell an asset at a fixed price at a fixed future date.
How can the amount change depending on the specified rate and at the same time be fixed?
Could you shed some light on this please?
Many thanks!