a) What are the differences between futures and forward markets? What are the pros and cons associated with using each one?

b) Two firms each need $2million in funds and go to the market for quotes. They are quoted: for A fixed: 8.3per cent; floating: BBSW plus 2per cent; for B fixed: 9.4per cent; floating: BBSW plus 2.9per cent. If A accepts the fixed-rate funds and B the floating-rate funds, then they both decide they can reduce their cost of funds through a swap, can you structure a swap where they both benefit equally?

c) An equity investment manager has decided to purchase at least $100million worth of shares in 3 months. The investment manager is concerned that there is a risk that the share price may rise over that period and is considering using a share index futures contract. What futures market transactions will the investment manager make today, and in three months?