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Futures contracts in risk management companies can use trading on a US exchange - Essay Example
Finance & Accounting
Pages 8 (2008 words)
Futures contracts in risk management companies can use trading on a US exchange Name Professor Course Date Executive Summary Futures contracts require two parties in order to be executed. It requires a buyer and a seller for complete transactions. The main reason for engaging in a futures exchange is to prepare stakeholders for any eventuality and be in a position of making appropriate decisions…
The agreement is based on a future transaction in which the commodity will be paid for in future at a time agreeable by both of the parties. This term is common in finance. These contracts are done on mutual consent negotiated at futures exchange acting as an intermediary. The partner who has agreed to purchase the asset in question is referred to as a long whereas the party who sells the given asset is said to short. The price agreed upon by both of the parties is the strike price. This means that the parties have agreed that the price is fair, and they will follow the accord. In this type of transaction, the buyer hopes that the price quoted in the transaction would rise in the future while the seller hopes that the price would decrease in the future. After the deal is sealed the buyers and the sellers would monitor the activities of the futures until the specified date comes. ...
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