FORWARD CONTRACTS AND FUTURES CONTRACTS

Robert Jarrow () and George S. Oldfield
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George S. Oldfield: Cornell University, Ithaca, NY 14853, USA

Chapter 11 in Financial Derivatives Pricing:Selected Works of Robert Jarrow, 2008, pp 237-246 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis paper provides a detailed discussion of the similarities and differences between forward contracts and futures contracts. Under frictionless markets and continuous trading, simple arbitrage arguments are invoked to value forward contracts, to relate forward prices and spot prices, and to relate forward prices and futures prices. We also argue that forward prices need not equal futures prices unless default free interest rates are deterministic.

Keywords: Derivatives; Options; Hedging; HJM; Black–Scholes; Forwards; Futures; Martingale Measure; Calls; Puts; Market Manipulation; Margin Requirements (search for similar items in EconPapers)
Date: 2008
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Journal Article: Forward contracts and futures contracts (1981)
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