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8. Forward and futures contracts The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are some common types of

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8. Forward and futures contracts The derivatives markets contain different types of contracts. Forward contracts, futures contracts, options, and swaps are some common types of derivatives contracts Based on your understanding of forward and futures contracts, identity the differences between the two Forward Contracts Futures Contracts These contracts possess performance risk, implying that the party having losses may not be able to make payments to fulfill the contract. O O Because there is an organized market for these contracts, they are highly liquid. The derivatives markets contain different types of contracts, Forward contracts, futures contracts, options, and swaps are some common types of derivatives contracts e True or False The volume of trading conducted in contracts for Interest rate and exchange rate futures is greater than the volume of trading occurring in commodity futures contracts False Tue Mall Toys Co. is planning to build a new production facility that will cost $10 million. It plans to finance this project with 10-year bonds that would carry a 7% interest rate if they were issued today. However, the company does not need the money for six months. Which of the following actions would hedge Mall Toys Co against an increase in interest rates? Take a long position in foreign exchange futures O take a short position in foreign exchange futures Take a long position in interest rate futures Take a short position in interest rate futures

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