2. AF5002 Derivatives and Risk
Lecturers
Lectures : Savva Shanaev (1-12)
Workshops : Savva Shanaev (1-12)
Seminars : Savva Shanaev (1-12)
Lectures : 1 x 2 Hour Lecture
Wednesday mornings (11:00 to 13:00)
CCE1-402 (TLT)
If you do not attend the lectures the workshops and seminars will have no context
and the work will be difficult to complete.
3. AF5002 Derivatives and Risk
Teaching
Lectures : 1 per Week Set out the fundamental learning
(2 Hrs)
Workshops : 1 per Week Build on the lectures to demonstrate
(1 Hr) practical application
Seminars : 1 per Week Build on the lectures/ workshops to
(1 Hr) test understanding of the learning
Assessment : Multiple Choice Question Exam (40%)
2,000 Word Assignment (60%)
Teaching is supplemented by the reading list and materials on the AF5002
Blackboard site ā¦
4. AF5002 Derivatives and Risk
For AF5002 we are going to look at financial markets Risk in terms of:
ā¢ Sources of risk
ā¢ Why risk is important
ā¢ The instruments available to deal with Risk
In doing so, there will be some maths to follow, some basic Excel and there will be
some new terms to learn!
6. Learning Outcomes ā¦
By the end of the lecture you will:
Ā» Know the difference between Long and Short positions.
Ā» Understand & compare the Futures & Forwards markets and their principal
mechanics.
Ā» Understand Margining!
Ā» Be able to explain what a Spot price is.
7. What is Risk?
The Failure of Risk Management: Why It's Broken and How to Fix It by Doug
Hubbard (2009), NJ USA, Wiley
8. Reuben, A. (2014). Headline numbers:
What will Mr Carney tell Mr Osborne?.
The British Broadcasting Corporation
Retrieved January 15, 2015 from:
http://www.bbc.co.uk/news/business-30800469
What is Risk?
9. Bank of England (2015) Inflation Report November
2015 Prospects for Inflation
Retrieved January 4th 2016 from : BOE Inflation Report
The 2013 forecast is almost
2% out and the current rate is
not within the āexpectedā fan
of potential results!!!
What is Risk?
10. Bank of England (2016) Inflation Report November
2016 Inflation Report
Retrieved January 4th 2017 from : BOE Inflation Report
The 2013 forecast is now over
2% out and the current rate
remains outside the 2013
āexpectedā fan of potential
results!!!
What is Risk?
11. Bank of England (2016) Inflation Report November
2016 Inflation Report
Retrieved January 4th 2017 from : BOE Inflation Report
Bank of England (2018) Inflation Report November
2018 Inflation Report
Retrieved January 24th 2019 from : BOE Inflation
Report
Again, the BoE expected an
upward trend and over only 24
months did not manage to
retain the actual
unemployment rate within the
fan of possibilities!!!
What is Risk?
12. So there are two issues that constitute āriskā in the context that we shall be looking
at it in this module :
1. That results do not meet expectations (in terms of quantum)
2. That results do not meet expectations (in terms of timing)
A failure in either one (or both) of these ārisksā
may result in [significant] financial loss.
ā The only function of economic forecasting is to make astrology look respectable.ā
Ezra Soloman ā Economist (from Readers Digest 1985). http://www.oxfordreference.com/view/10.1093/acref/9780191843730.001.0001/q-oro-ed5-00017202
What is Risk?
13. What is a Derivative?
Ā» A derivative may be defined as:
ā A financial security whose payoff depends on (or derives
from other, more fundamental, variables such as a stock
price, an exchange rate, a commodity price an interest
rate ā or event the price of another derivative securityā
Sundaram, R & Das, S (2011) Derivatives Principles & Practice, International Edition, McGraw Hill
Ā» The underlying variable or instrument is known as :
āThe Underlyingā!
14. But So What ā¦?
Ā» Derivatives are everywhere :
ā¢ Who knows of someone that has fixed their energy prices over the next
12/18 months?
ā¢ Who has ever placed a spread bet?!
ā¢ Who has ever put down a returnable deposit on a hard-to-source
consumer item ahead of release?
17. Futures & Forwards
Why are they Important ā¦?
Source : 2019 FIA Annual Volume Survey (Futures Industry Association)
Years Asia North America Europe Latin America Other Grand Total
2010 4658.65 2793.08 3055.17 569.11 222.16 11298.17
2011 4598.84 3093.02 3571.39 626.55 232.33 12122.13
2012 4208.46 2705.83 3213.97 651.54 230.46 11010.25
2013 4778.54 3105.63 3295.09 704.28 252.50 12136.04
2014 4558.24 3224.73 3382.52 659.25 316.13 12140.88
2015 6177.56 3267.22 3734.55 736.78 562.09 14478.19
2016 6702.60 3632.91 4137.97 855.78 562.85 15892.10
2017 5577.24 3717.43 3912.09 1139.96 498.70 14845.42
2018 6575.22 4319.81 4164.33 1730.02 387.74 17177.12
2019 7660.25 4259.21 3964.60 2850.13 506.39 19240.57
CAGR 5.68% 4.80% 2.94% 19.60% 9.59% 6.09%
Years Asia North America Europe Latin America Other Grand Total
2010 4332.68 4376.68 1361.08 949.77 100.59 11120.80
2011 5227.08 5092.13 1410.81 976.65 117.53 12824.19
2012 3317.93 4498.45 1135.81 1079.09 86.38 10117.67
2013 2523.07 4726.37 1077.54 978.90 124.94 9430.83
2014 2698.95 4991.20 1047.47 857.51 117.17 9712.30
2015 3519.90 4931.72 1061.29 713.96 96.01 10322.89
2016 2478.28 4957.15 1041.79 759.51 91.18 9327.92
2017 3234.85 5169.04 1023.85 831.97 96.45 10356.16
2018 4644.35 6239.35 1100.77 1046.50 101.41 13132.38
2019 6825.70 6006.19 1069.01 1248.77 84.38 15234.06
CAGR 5.18% 3.58% -2.65% 3.09% -1.93% 3.56%
Futures annual volume, 2010-19
Options annual volume, 2010-19
-
5,000,000,000
10,000,000,000
15,000,000,000
20,000,000,000
25,000,000,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Other
Latin America
Europe
North America
Asia
18. Source : 2019 FIA Annual Volume Survey (Futures Industry Association)
Futures & Forwards
Why are they Important ā¦?
Asia
45%
North America
39%
Europe
7%
Latin America
8%
Other
1%
Asia
40%
North America
22%
Europe
20%
Latin America
15%
Other
3%
Futures market shares, 2019
Options market shares, 2019
19. Source : BIS Statistical Release - OTC derivatives statistics (December 2018)
Futures & Forwards
Why are they Important ā¦?
21. What do we mean by āManage Riskā ā¦
There are several trading approaches to risk
Hedgers Aim to protect themselves against the adverse effects of
risk.A
Speculators Will use risk and instruments to manage it in order to
make a profit.
Arbitrageurs Will use differences in ārisk perceptionā in different
markets to buy/sell securities in those markets to ālock
inā a riskless profit.
22. The Long and the Short of it ā¦
Long positions and Short positions are critical throughout this module.
Long position : A market participant has agreed to BUY
Short Position : A market participant has agreed to SELL
23. Futures
ā¢ Futures markets have existed for hundreds of years.
ā¢ They were originally designed to meet the needs of merchants and farmers ā¦
Example
ā¢ A merchant wants to sell wheat to his customers but has no idea what the
harvest is going to be like ā¦
ā¢ A farmer growing wheat wants to sell his crop to a merchant but has no idea
what the harvest is going to be like ā¦
24. Ā» The merchant is facing risk ...
ā¢ How can the merchant guarantee that he will have stock?
ā¢ How can the merchant determine the price he will pay?
ā¢ How can the merchant determine the price he will charge?
Ā» The farmer is facing risk ā¦
ā¢ How can the farmer guarantee that he will sell his crop?
ā¢ How can the farmer determine the price he will receive?
Futures
25. The merchant and the farmer can agree a futures contract ā¦
Ā» The merchant agrees to buy an amount of wheat from the farmer at a given
price.
ā¢ The merchant takes a LONG futures position at the futures price.
Ā» The farmer agrees to sell an amount of wheat to the merchant at a given
price.
ā¢ The farmer takes a SHORT futures position at the futures price.
Futures
26. Ā» The merchant is still facing risk but the risk has changed ...
ā¢ The merchant now has stock, guaranteed by the exchange.
ā¢ The merchant has a fixed price and can determine his price
BUT
ā¢ What if the exchange defaults and the grain is not delivered?
(This is unlikely but it is still possible!)
ā¢ What if the price of wheat falls and is significantly lower than the futures
price agreed?
Futures
27. Ā» The farmer is still facing risk ā¦
ā¢ The farmer has an agreed buyer for his crop.
ā¢ The farmer has secured a pre-determined price he will receive.
BUT
ā¢ What if the exchange defaults and does not take/enable delivery of the
grain?
(This is unlikely but it is still possible!)
ā¢ What if the price of wheat rises and is significantly higher than the futures
price agreed?
Futures
28. Ā» Risk still remains for each of the counterparties.
Ā» The Risk each party faces may have been mitigated but risk does still remain
in the transaction.
Ā» Ultimately, the risk has been transformed.
ā¢ From a āpracticalā risk to a financial risk
ā¢ From a commodity issue to a derivative (the risk is now based on the
price of the underlying commodity).
Futures
29. What is the Spot Price ā¦
Ā» SPOT is an acronym for : Settlement Price on Trade
Ā» The Spot Price is the price for immediate or almost immediate delivery.
Ā» Ultimately, as a futures contract nears maturity, the Spot Price will
approximate to the Futures price
(The delivery dates for each type of contract will converge).
Ā» This is shown for the in the following graph:
31. Futures
The SPOT (current) price is
higher than the futures price
agreed in Janā 2018.
The merchant benefits by
this amount.
The farmer loses out by this
amount.
Note :
The SPOT Price at 12/12/18 and the
futures price for December delivery will
have converged at the delivery date.
32. Futures
The SPOT (current) price is
lower than
the futures price agreed in
Janā 2018.
The merchant loses out by
this amount.
The farmer benefits by this
amount.
THIS CREATES A
POTENTIAL CREDIT RISK
FOR THE FUTURES
INSTRUMENT!
Note :
The SPOT Price at 12/12/18 and the futures
price for December delivery will have
converged at the delivery date.
33. Futures & Risk (Example)
Foreign Exchange Risk
1. Alpari (UK) Limited was officially regulated by the FCA in September 2006.
2. The company offered foreign exchange (ForEx) services and financial spread
betting on ForEx and other indices.
3. On the 15th January 2015, in a press release, the Swiss National Bank
announced it would no longer support the Swiss Franc : Euro Exchange rate
of CHF1.20 : Euro 1.00, a policy that had been in place for 3 years.
The CHF:Euro exchange rate changed by 30% in one day!
4. This negatively impacted Alpari (UK) Limited customers with the brokerage
reported to have shut on the 16th January 2015. On 19th January 2015 the
company entered a Special Administration Regime.
ā Where a client cannot cover this loss, it is passed on to us ā¦ This has forced
Alpari (UK) Limited to confirm today that it has entered into insolvency."
35. Futures Exchanges
Australian Securities Exchange (ASX)
Bombay Stock Exchange (BSE)
Chicago Board Options Exchange (CBOE)
China Financial Futures Exchange (CFFEX)
Eurex (EUREX)
London Metal Exchange (LME)
Mexican Derivatives Exchange (MEXDER)
Montreal Exchange (ME)
Osaka Securities Exchange (OSE)
Singapore Exchange (SGX)
For a more complete list incl. web addresses see :
āFundamentals of Futures and Options Marketsā Hull, J (2011), USA
36. Source : 2019 FIA Derivatives Volume Data
Futures Exchanges
Exchange 2019 Volume 2018 Volume % change 2019 market share
1 National Stock Exchange of India 5,960,653,879 3,790,090,142 57.27% 17.29%
2 CME Group 4,830,045,369 4,844,857,131 -0.31% 14.01%
3 B3 3,880,624,283 2,574,073,178 50.76% 11.26%
4 Intercontinental Exchange 2,256,762,531 2,474,223,217 -8.79% 6.55%
5 Eurex 1,947,144,196 1,951,763,081 -0.24% 5.65%
6 CBOE Holdings 1,912,075,382 2,050,884,142 -6.77% 5.55%
7 Nasdaq 1,785,341,204 1,894,713,045 -5.77% 5.18%
8 Korea Exchange 1,546,717,194 1,408,259,039 9.83% 4.49%
9 Moscow Exchange 1,455,043,932 1,500,375,257 -3.02% 4.22%
10 Shanghai Futures Exchange 1,447,597,054 1,201,969,095 20.44% 4.20%
11 Dalian Commodity Exchange 1,355,584,225 981,927,369 38.05% 3.93%
12 Zhengzhou Commodity Exchange 1,092,703,580 817,969,982 33.59% 3.17%
13 BSE 1,026,425,811 1,032,693,325 -0.61% 2.98%
14 Miami International Holdings 440,049,131 421,320,501 4.45% 1.28%
15 Hong Kong Exchanges and Clearing 438,690,021 480,966,627 -8.79% 1.27%
16 Borsa Istanbul 387,996,034 236,393,421 64.13% 1.13%
17 Japan Exchange Group 361,063,321 411,945,912 -12.35% 1.05%
18 Multi Commodity Exchange of India 306,592,744 230,339,630 33.10% 0.89%
19 Taiwan Futures Exchange 260,765,482 308,083,576 -15.36% 0.76%
20 ASX 260,478,736 248,003,922 5.03% 0.76%
Others 1,522,274,931 1,448,645,052 5.08% 4.42%
Total 34,474,629,040 30,309,496,644 13.74% 100.00%
Top derivatives exchanges in 2019
37. Futures & Credit Risk - Exchanges
Ā» Futures exchanges guarantee the performance of contracts therefore the
Exchanges are exposed to default risk of investors.
THIS IS CRITICAL!!!
Ā» In order to manage the credit risk that a Futures contract represents,
Exchanges operate a Margining procedure.
Ā» At the end of each trading day, based on Settlement Prices, the Margin
Account for each investor is updated to reflect their daily gains / losses. This
is known as:
ā¢ Daily Settlement, or
ā¢ Marking to Market
38. Management of the Market
In order to avoid large speculative movements on the Exchange, ācircuit breakersā
are employed:
Ā» Price Limits The max. daily price movement allowed (ā/ā).
Trading closes for the day if a Limit Move occurs.
Prevents large speculative price movements.
Ā» Position Limits The max. number of contracts an investor may hold.
This prevents any one investor unduly influencing the market.
39. Specifications of the Futures Contract
A Futures contract is extremely standardised and will specify the nature of the
agreement between the two trading parties, incl.:
Ā» The Asset The subject of the trade.
If there are different grades of quality (e.g. corn or orange)
juice, the specific quality grade.
Ā» Contract Size The amount of Asset to be delivered.
Ā» Delivery The place where delivery must occur
Arrangements (often specified by the Exchanges).
Ā» Delivery The month in which delivery will occur.
Months
40. The Pricing of Futures Contracts
Three prices will often be quoted for Futures contracts. These are often shown on
data platforms e.g. Bloomberg and in newspapers e.g. the WSJ & FT).
Opening Price The first price at which the contract is traded at the beginning
of a trading session.
Closing Price The last price at which the contract is traded at the end of a
trading session.
Settlement Price A representative price, chosen by the Exchange, from the
closing range (prices in the last 30/60 seconds of trading).
This is a contractās official closing price.
41. Types of Orders for Futures Contracts
Market Order A trade be carried out at the most favourable price available
in the market.
Limit Order Specifies that an order may be executed at particular or more
favourable price.
[May not be executed at all].
Stop-Loss This becomes a market order once a specified Order price is
reached. It is used as a means of limiting losses should markets
move unfavourably.
Market If This becomes a market order once a specified Touched price is
reached. It is used as a means of capturing gains on a contract
should markets move favourably.
42. Futures & Credit Risk - An Example
Ā» JR & Bobby Limited are users of Crude Oil.
Ā» At the end of Q4 2017, JR & Bobby Limited determine that
in the Q3 2018 they will need 100,000 barrels of Crude Oil,
to be delivered by May 2018.
Ā» In order to manage their budgets they want some certainty about the price
they will have to pay for their oil in Q3 2018.
Ā» Based on this information:
ā¢ What is the principle risk faced by JR & Bobby Limited?
ā¢ What trading approach would be most appropriate? a) Arbitrage
b) Hedging
c) Speculation
Variable Oil Prices
43. Futures & Credit Risk - An Example
Ā» JR & Bobby Limited are users of Crude Oil.
Ā» At the end of Q4 2017, JR & Bobby Limited determine that
in the Q3 2018 they will need 100,000 barrels of Crude Oil,
to be delivered by May 2018.
Ā» In order to manage their budgets they want some certainty about the price
they will have to pay for their oil in Q3 2018.
Ā» Based on this information:
ā¢ What is the principle risk faced by JR & Bobby Limited?
ā¢ What trading approach would be most appropriate? a) Arbitrage
b) Hedging
c) Speculation
Variable Oil Prices
44. Futures & Risk (JR & Bobby Ltd)
Key Points I
Crude Oil Price Risk
1. In order to manage potential crude oil price risk in their business, JR & Bobby
Limited decided to HEDGE their risk on NYMEX using a Futures instrument.
2. They took a LONG POSITION in crude oil with a May 2018 delivery.
3. The Crude Oil Futures Price at the time the contract was completed was
$62.50
45. Futures Exchange Credit Risk
This would represent credit risk to
the Exchange - as the price drops
below the agreed futures price, the
incentive to default and purchase
SPOT increases!
Futures & Risk (JR & Bobby Ltd)
Key Points II
46. Futures Exchange Credit Risk
Ā» In order to hedge their oil price risk on NYMEX, JR & Bobby Limited had to
assume some NYMEX imposed CREDIT RISK.
Ā» This took the form of the operation of a MARGIN ACCOUNT and DAILY MARK TO
MARKET ADJUSTMENTS.
JR & Bobby Limited Cashflow Risk
Ā» This risk manifested itself in terms of CASHFLOW RISK
(see the spreadsheet below):
LINK TO SPREADSHEET
Futures & Risk (JR & Bobby Ltd)
Key Points II
47. Ā» The Margin Account removes the incentive to default:
Agreed Futures Price = Current Price + Margin A/c Balance
Based on the Agreed Futures Price
Futures & Risk (JR & Bobby Ltd)
Key Points III
48. Ā» The Margin Account removes the incentive to default:
Agreed Futures Price = Current Price + Margin A/c Balance
Current Price + Margin A/c Balance
Futures & Risk (JR & Bobby Ltd)
Key Points IV
49. Futures & Delivery - Key Points
Ā» Delivery of Futures is usually within a specific āmaturity monthā
Ā» Futures contracts may be settled in three ways:
ā¢ Physical Delivery
ā¢ Cash Settlement
ā¢ Exchange-For-Physicals
(an agreement off Exchange - must include physical delivery)
Ā» Delivery may include alternative asset options to avoid market supply
ācornersā and āsqueezesā artificially created to manipulate the market and/or
inflate prices
50. Futures & Delivery - JR & Bobby Limited
1. It is unlikely that JR & Bobby Limited would have taken delivery of the
100,000 barrels of oil they purchased an interest in.
2. It is likely that they would have closed out their position and sourced the
required 100,000 barrels oil from their usual suppliers.
3. They used the HEDGE to manage the oil price not to manage their supply
chain!
4. Fewer than 5% of Futures contracts are held open for delivery!
Source : Sundaram & Das (2011), Derivatives Principles & Practice, McGraw Hill, New York
51. JR & Bobby Limited
Futures & Spot Price Convergence
52. What have we learnt so far
ā¢ We have looked at a single period Futures contract from the perspective of a
HEDGING counterparty.
Time : T0
The time the
contract is made
Time : T
The maturity date
of the contract
Asset
Price
The
agreed
Futures
Price
FT0
FT
53. What have we learnt so far ā¦
ā¢ We have looked at a single period Futures contract from
the perspective of a HEDGING counterparty.
Time : T0
The time the
contract is made
Time : T
The maturity date
of the contract
Asset
Price
The
agreed
Futures
Price
FT0
Cashflow
Margin
SPOTT = FUTUREST
FT0
55. Forwards
ā¢ Contract entered into either:
a) Financial Institution : Financial Institution
b) Financial Institution : Client Institution
c) Client Institution : Financial Institution
ā¢ Futures are direct contracts between the two counterparties:
Ā» One counterparty assumes the Long Position (Buyer)
Ā» One counterparty assumes the Short Position (Seller)
Ā» They are traded āOver the Counterā (OTC) ā there is no Exchange
involved.
56. ā¢ Contract Terms
Ā» Depend upon the counterparties ā they are not necessarily standardised
ā¢ Delivery
Ā» Usually on a specific date, under conditions negotiated within the contract
terms
Ā» Majority of contracts do result in physical delivery
ā¢ Settlement
Ā» Contracts are settled on the Delivery Date
Forwards
57. Ā» The merchant is facing risk ...
ā¢ How can the merchant guarantee that he will have stock?
ā¢ How can the merchant determine the price he will pay?
ā¢ How can the merchant determine the price he will charge?
Ā» The farmer is facing risk ā¦
ā¢ How can the farmer guarantee that he will sell his crop?
ā¢ How can the farmer determine the price he will receive?
Forwards
58. The merchant and the farmer can agree a forwards contract ā¦
Ā» The merchant agrees to buy an amount of wheat from the farmer at a given
price.
ā¢ The merchant takes a LONG forwards position at the forwards price.
Ā» The farmer agrees to sell an amount of wheat to the merchant at a given
price.
ā¢ The farmer takes a SHORT forwards position at the forwards price.
Forwards
59. Ā» The merchant is still facing risk but the risk has changed ...
ā¢ The merchant now has stock, subject to delivery by the farmer.
ā¢ The merchant has a fixed price and can determine his price
BUT
ā¢ What if the farmer defaults and the grain is not delivered?
(This is possible!)
ā¢ What if the price of wheat falls and is significantly lower than the forwards
price agreed?
Forwards
60. Ā» The farmer is still facing risk ā¦
ā¢ The farmer has an agreed buyer for his crop.
ā¢ The farmer has secured a pre-determined price he will receive.
BUT
ā¢ What if the merchant defaults and does not take delivery or pay for the
grain?
(This is possible!)
ā¢ What if the price of wheat rises and is significantly higher than the
forwards price agreed?
Forwards
61. Ā» Risk still remains for each of the counterparties.
Ā» The Risk each party faces may have been mitigated but risk does still remain
in the transaction.
Ā» Ultimately, the risk has been transformed.
ā¢ From a āpracticalā risk to a financial risk
ā¢ From a commodity issue to a derivative (the risk is now based on the
price of the underlying commodity).
Futures
62. Forwards & Risk - An Example
Ā» JR & Bobby Limited are users of Crude Oil.
Ā» At the end of Q4 2017, JR & Bobby Limited determine that
in the Q3 2018 they will need 100,000 barrels of Crude Oil,
to be delivered by May 2018.
Ā» In order to manage their budgets they want some certainty about the price
they will have to pay for their oil in Q3 2018.
Ā» Based on this information:
ā¢ What is the principle risk faced by JR & Bobby Limited?
ā¢ What trading approach would be most appropriate? a) Arbitrage
b) Hedging
c) Speculation
Variable Oil Prices
63. Forwards & Risk - An Example
Ā» JR & Bobby Limited are users of Crude Oil.
Ā» At the end of Q4 2017, JR & Bobby Limited determine that
in the Q3 2018 they will need 100,000 barrels of Crude Oil,
to be delivered by May 2018.
Ā» In order to manage their budgets they want some certainty about the price
they will have to pay for their oil in Q3 2018.
Ā» Based on this information:
ā¢ What is the principle risk faced by JR & Bobby Limited?
ā¢ What trading approach would be most appropriate? a) Arbitrage
b) Hedging
c) Speculation
Variable Oil Prices
64. Forwards & Risk (JR & Bobby Ltd)
Key Points I
Crude Oil Price Risk
1. In order to manage potential crude oil price risk in their business, JR & Bobby
Limited decided to HEDGE their risk using a Forwards instrument.
2. They took a LONG POSITION in crude oil with a May delivery.
3. The Crude Oil Forwards Price at the time the contract was completed was
$55.32
65. Forward Agreement Risk
Ā» In order to hedge their oil price risk JR & Bobby Limited had to enter an
agreement with another party and assume the CREDIT & (POTENTIALLY)
DELIVERY RISK implied by the contract.
JR & Bobby Limited Cashflow Risk
Ā» This credit and potentially delivery risk is implied because it does not manifest
itself in terms of CASHFLOW RISK. The risk is borne by the company but is
likely to manifest only at the delivery date.
Forwards & Risk (JR & Bobby Ltd)
Key Points II
70. Learning Outcomes ā¦
By the end of the lecture you will:
Ā» Know the difference between Long and Short positions.
Ā» Understand & compare the Futures & Forwards markets and their principal
mechanics.
Ā» Understand Margining!
Ā» Be able to explain what a Spot price is.
