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We understand that futures and forwards can be used to reduce risk. What are the differences between futures and forwards? A Canadian firm will have

We understand that futures and forwards can be used to reduce risk. What are the differences between futures and forwards?

A Canadian firm will have to pay US $1 million six months from now for the goods purchased from a US company. In light of the COVID-19 pandemic, the company is concerned about potential increases in the value of the US dollar in the future. How could this firm hedge against this risk with forwards?

Forward contract quotations (CAD/USD)

period price

1 month - 1.37374

3 month - 1.37510

6 month - 1.37765

9 month - 1.38052

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