# 微积分网课代修|导数代写Derivatives theory代考|LT013086 TRADING ON FUTURES MARKETS

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## 微积分网课代修|AP微积分代写AP calculus辅导|TRADING ON FUTURES MARKETS

Forward contracts are traded over-the-counter (OTC) whereas most futures are traded on an exchange and the differences between these two approaches are summarised in Table 2.1.
The range of assets on which futures contracts are written is very wide and they are traded on a large number of exchanges around the world (Table 2.2). The basic requirements in buying and selling different types of futures contracts and using them for hedging and speculation are very similar, even though futures contracts are written on a diverse set of underlying assets (e.g. gold, oil, wheat, stocks, stock indices, T-bills, T-bonds, interest rates). The growth in futures contracts is primarily due to the increased volatility of the price of the underlying assets and the need to hedge this risk. Futures contracts which trade in a highly liquid market (with low bid-ask spreads and low commissions) are available on a wide variety of underlying assets, whereas only the OTC forward market for foreign exchange rivals the volume of trading on futures markets.

A futures exchange is usually a corporate entity whose members elect a board of directors, who decide on the terms and conditions under which existing contracts are traded and whether to introduce new contracts (subject usually to the regulatory authority which in the US is the Commodity Futures Trading Commission [CFTC]).

## 微积分网课代修|AP微积分代写AP calculus辅导|Standardisation

The futures exchange sets the size of each contract, the units of price quotation, minimum price fluctuations, the ‘grade’ and place for delivery, any daily price limits and margin requirements as well as opening hours for trading. For agricultural commodities, the type or grade is also fixed in the futures contract. For example, for corn the standardised grade is ‘No. 2 Yellow’ but other grades can also be delivered – for example ‘No 1. Yellow’ is deliverable for 1.5 cents per bushel more than ‘No. 2 Yellow’ because the quality is higher. The futures exchange sets the minimum contract size (e.g. delivery of 5,000 bushels of corn), delivery dates (e.g. specific dates in March, May, June, July, September, and December) and delivery arrangements (e.g. delivery only to towns A,B, and C ).

For futures on financial assets such standardisation is easier. For example, a foreign exchange (FX) futures contract on the pound sterling (GBP) is rather a homogenous product and only the delivery dates, settlement price, and contract size need to be organised by the exchange. Some futures contracts are traded with maturity dates of only up to a year or two ahead but some contracts have much longer maturity dates. It depends primarily on the demand for such contracts by hedgers. For example, the Eurodollar futures contract is actively traded with maturities out to 15 years or more because these contracts are used by swap dealers to hedge their interest rate swap positions.