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Derivatives

This topic has 1 reply, 2 voices, and was last updated 1 year ago by Stephen Widberg.

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May 20, 2021 at 4:03 am #621148
Noah098
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Sir how do we measure the FV of a derivative? If the FV of say 350tonnes of wheat=2500shares, the contracts can be settled in cash and was not entered to meet either of the entity’s operating requirements.
Can we say that FV of the derivative is zero, because we will have to make no initial net payment?
May 20, 2021 at 5:41 am #621149
Stephen Widberg
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At start of contract FV will usually be $nil for most derivatives. To get an OPTION , though, you have to pay money, so there will be a financial asset.
Later on the FV is determined by the market price, and will be given in the exam question.
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