ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date. A forward contract can be used for hedging or speculation, although its non-standardized nature makes it particularly apt for hedging.

Detailed explanation-2: -The underlying assets associated with forward and futures contracts include financial assets (stocks, bonds, currencies, market indexes, and interest rates) and commodities (crops, precious metals, and oil-and gas-related products).

Detailed explanation-3: -What Is a Futures Contract? A futures contract is a legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future.

Detailed explanation-4: -Futures are an obligation to the buyer and a seller. The seller of the future agrees to provide the underlying asset at expiry, and the buyer of the contract agrees to buy the underlying at expiry. The price they receive and pay, respectively, is the price they entered the futures contract at.

Detailed explanation-5: -A forward contract is a non-standardized contract between two parties to buy or sell an asset at a specified future time, at a price agreed upon today. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position.