SETTING
Sixth Canadian Edition
Lusztig, Cleary, Schwab
CHAPTER TWENTY
Futures
Learning Objectives
1. Explain how futures contracts differ from options.
2. Discuss the difference between futures contracts
and forward contracts.
3. Define the terms backwardation and forwardation.
4. Explain arbitrage and demonstrate how it works in
commodity and financial futures.
5. Describe how different types of futures (foreign
currency, interest rate, stock index, etc.) contribute
to risk management.
Introduction
Physical commodities and financial instruments
are traded in cash markets
Two types of cash markets:
spot markets feature immediate delivery
mining companies
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