Future Contracts is a standardized agreement whereby two parties agree to exchange an asset (physical or financial), at a price determined at a future date.
The most widespread contract model in hedging financial operations is the one prepared by the International Association of Swaps and Derivatives of the USA known as ISDA.
This document is concerned with accurately defining both the more general terms and the specific assumptions that may affect operations.
As well as the mechanisms to avoid the risk of default between the parties through central clearinghouses.
All futures contracts have the following standardized features:
Cost per point or tick
Guarantees required by contract
Futures contracts allow the introduction of long positions and short positions. There are the following types of futures based on the underlying asset to which they replicate:
The formula for calculating a future is as follows:
Future theoretical value = [Counted Value (CV) * [1 + ((r * t) / (360))] – [D * (1 + (r * t ‘) / (360))]
Suppose that we have to calculate the theoretical price of a futures contract with a 4-month maturity of one X share. That is quoted on the
market at 20 euros, with the market interest rate being 1% per year.
VT = 20 * (1 + (0.01 * 120/360) – 0 (No dividend payment) = 20.06 euros