Chapter 2: Forward and Futures Contracts

In this section

• Forward Contracts: Structure, Payoffs, and Settlement
  Forward Contracts: Structure, Payoffs, and Settlement (CFA Level 1): Key Elements of a Forward Contract, Payoff Profiles, and Settlement Mechanisms. Key definitions, formulas, and exam tips.
• Futures Contracts: Marking to Market and Margins
  Futures Contracts: Marking to Market and Margins (CFA Level 1): Standardization and Clearinghouse Support, Key Components of Futures Margins, and Quick Anecdote. Key definitions, formulas, and exam tips.
• Forward vs. Futures: Key Distinctions
  Forward vs. Futures: Key Distinctions (CFA Level 1): Bespoke Nature of Forward Contracts, Key Features of Futures, and Margining and Daily Settlement. Key definitions, formulas, and exam tips.
• Margining, Collateral, and Settlement
  Margining, Collateral, and Settlement (CFA Level 1): Purpose of Margin in Futures Contracts, Initial Margin, and Maintenance Margin and Margin Calls. Key definitions, formulas, and exam tips.
• Index and Currency Futures
  Index and Currency Futures (CFA Level 1): Stock Index Futures, Why They Matter, and Contract Specifications. Key definitions, formulas, and exam tips.
• Commodity, Interest Rate, and Equity Futures
  Commodity, Interest Rate, and Equity Futures (CFA Level 1): Test Your Knowledge: Commodity, Interest Rate, and Equity and Which of the following is most commonly associated. Key definitions, formulas, and exam tips.
• Physical vs. Cash Settlement
  Physical vs. Cash Settlement (CFA Level 1): Why Differentiate Between Physical and Cash Settlement, Physical Settlement in Depth, and Physical Delivery Basics. Key definitions, formulas, and exam tips.
• Forward Rate Agreements (FRAs)
  Forward Rate Agreements (FRAs) (CFA Level 1): Core Concepts and Market Usage, Anatomy of an FRA, and Timeline of an FRA. Key definitions, formulas, and exam tips.
• Calendar Spreads and Interdelivery Spreads
  Calendar Spreads and Interdelivery Spreads (CFA Level 1): Fundamentals of Calendar Spreads, Mechanics of a Calendar Spread, and Backwardation vs. Contango. Key definitions, formulas, and exam tips.
• Clearing House Variation and Initial Margin Calculations
  Clearing House Variation and Initial Margin Calculations (CFA Level 1): Role of the Clearinghouse, Variation Margin: A Daily Settlement Mechanism, and Concept of Initial Margin. Key definitions, formulas, and exam tips.
• Exchange for Physical (EFP) Transactions
  Exchange for Physical (EFP) Transactions (CFA Level 1): Basics of EFP Mechanics, Rationale and Key Benefits, and EFP vs Open-Market Trading and Related Transactions. Key definitions, formulas, and exam tips.
• Algorithmic Execution in Futures Markets
  Algorithmic Execution in Futures Markets (CFA Level 1): Foundations of Algorithmic Trading in Futures, Why Algorithms Are Useful in Futures Markets, and Market Microstructure and Execution Quality. Key definitions, formulas, and exam tips.
• Spread Trading in Futures Markets
  Spread Trading in Futures Markets (CFA Level 1): Key Concepts in Spread Trading, Basic Idea of Spread Trading, and Why Choose Spread Trading?. Key definitions, formulas, and exam tips.
• Cross-Margining Among Different Futures Exchanges
  Cross-Margining Among Different Futures Exchanges (CFA Level 1): Key Concepts, Cross-Margining Basics, and Offsetting Positions. Key definitions, formulas, and exam tips.
• Microstructure of the Futures Market
  Microstructure of the Futures Market (CFA Level 1): Central Limit Order Book (CLOB), How Orders Flow, and Price/Time Priority. Key definitions, formulas, and exam tips.
• Tail Risk in Futures Trading
  Tail Risk in Futures Trading (CFA Level 1): Understanding Tail Risk, Key Drivers of Tail Risk in Futures, and Leverage and Gap Moves. Key definitions, formulas, and exam tips.
• Portfolio Margining Approaches for Futures Traders
  Portfolio Margining Approaches for Futures Traders (CFA Level 1): Key Concepts of Portfolio Margining, Portfolio Margin vs Traditional (Strategy-Based) Margin, and Risk Calculation Methodologies. Key definitions, formulas, and exam tips.
• Basis Risk in Futures Hedging
  Basis Risk in Futures Hedging (CFA Level 1): Understanding Basis Risk, Defining Basis, and Why Basis Risk Happens. Key definitions, formulas, and exam tips.