Mechanics of Futures Markets (FRM Part 1 - Book 3 - Chapter 5)

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After completing this reading, you should be able to:
- Define and describe the key features of a futures contract, including the asset, the contract price and size, delivery, and limits.
- Explain the convergence of futures and spot prices.
- Describe the rationale for margin requirements and explain how they work.
- Describe the role of a clearinghouse in futures and over-the-counter market transactions.
- Describe the role of central counterparties (CCPs) and distinguish between bilateral and centralized clearing.
- Describe the role of collateralization in the over-the-counter market and compare it to the margining system.
- Identify the differences between a normal and inverted futures market.
- Explain the different market quotes.
- Describe the mechanics of the delivery process and contrast it with cash settlement.
- Evaluate the impact of different trading order types.
- Compare and contrast forward and futures contracts.

[@sumanbohara9661]

Very effective.

[@omkarparab7483]

Thank you!

[@vnkris9482]

great video, so underrated

[@analystprep]

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[@mihirkumar2887]

Sir why there is a difference between a stock and its future contract lets say apple is trading @$10 but its future is at @15 why is that difference and how do we calculate or decide the future pricing

[@potatowithpencil7184]

Thanku so much sir

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[@ashishsinha9035]

Nice video. One minor correction (in the text) though. It is mentioned against the last bullet point under the heading that 'A normal futures curve will show a rising slope while an inverted futures curve will show a falling slope. Actually, slope of both the curves will behave in the opposite way.