FINANCIAL FUTURES

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SUMMARY

This modules enables participants to compare prices in the cash market to the creation of synthetic instruments using futures and forwards. The focus of the module is the cost, benefits and possibilities of interest rate and foreign currency exposure management.

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OBJECTIVES

Upon completion of this module, participants will be able to:

1. Describe a forward rate agreement.

2. Describe a futures contract.

3. Compare and contrast forwards and futures.

4. Discuss the growth of the futures markets.

5. Identify the relationship between the cash market and the futures market.

6. Identify the sources of futures quotes and conventions on the various exchanges.

7. Calculate implied forward rates from futures price quotes.

8. Determine the use of futures as a hedging tool.

9. Construct a hedge using interest rate and foreign currency futures.

10. List the ways futures contracts can be used for speculation.

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