Chapter 2: Tasks Flashcards
1
Q
Forward contract
A
- Bilateral trading agreement on quantity, quality, price and date of delivery, unconditional delivery
- payment of delivery
2
Q
Future contract
A
- Exchange based trading, allow for traders/speculators to participate in the market
- these middleman own the commodity before delivery and thus carry the risk of price change
- payment at the time of contract conclusion
- unconditional delivery
3
Q
Options
A
- Conditional delivery-option owner doesn’t have to exercise his/her option
- call option
- put option
- options have two elements to the price: strike price (the price paid, when option is exercised); premium price (paid for the option itself)
4
Q
Call option
A
Right to buy at a certain price at a certain time
5
Q
Put option
A
Right to sell at a certain price at a certain time
6
Q
Spot contract
A
- Agreement on price, quantity, location
- unconditional and immediate delivery
