Futures Markets Structure and Pricing - Basics

A futures contract is a legally-binding standardised contract listed and tradeable on a regulated derivatives Exchange, much like trading a stock on a Stock Exchange. This pathway will give an overview of futures including their structure and how they are traded.

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7 video modules • 39 minutes

  • Introduction to Derivatives Exchanges

    Join Abdulla as he outlines the background of derivatives contracts, and discusses the development of the forwards/futures market throughout time.

    Abdulla Javeri03:37

  • Contract Specifications on Derivatives Exchanges

    In the second video of Abullas Derivatives Exchanges series, we will cover some of the contract specifications of derivatives, including Tick Size, Tick Value and the different delivery methods.

    Abdulla Javeri07:21

  • Clearing Houses

    In the third video of his series, Abdulla explains why a clearing House is crucial to the smooth functioning of business on the exchange. He discusses the role of Clearing Houses as guarantors of contract performance, acting as central counterparty in every transaction administering all post-trade activity; including delivery and settlement.

    Abdulla Javeri05:14

  • Derivatives Exchange Membership

    In the final video of this series on derivatives exchanges, Abdulla examines the membership structure of those exchanges whilst noting that not all exchanges will be identical.  

    Abdulla Javeri05:22

  • Introduction to Futures and Forwards

    Futures and forwards are both derivatives, and a derivative is a financial product, instrument or contract whose value or price is derived from the price of something else. In the first video, Abdulla provides an overview of both contracts, their main characteristics and differences.

    Abdulla Javeri05:38

  • Pricing of Futures and Forwards

    In the second video, Abdulla describes how the spot, and forward or futures prices are connected by the arbitrage-free principle. The relationship is based on the costs of carry. In efficient markets, arbitrage activity will generally ensure that the prices in the respective markets are maintained at levels consistent with that principle.

    Abdulla Javeri06:23

  • Clearing House Initial and Variation Margins

    In the final video, Abdulla discusses a prominent characteristic of exchanges in that they use clearing houses to act as a central counterparty for all transactions. A Clearing House guarantees the performance of futures and options contracts traded on its associated exchange. And secondly, to protect itself from the risk of default it operates a margining system.

    Abdulla Javeri06:13

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