The GFMI Futures and Forwards Course
Our Futures and Forwards Course was designed to introduce participants to the futures and forwards market. Specifically, this course introduces the features, characteristics, and differences between the two markets. An overview of the basic applications of these products is explored, while margin requirements and the settlement process for the futures markets are investigated. “The comparing and contrasting of futures and forwards,” was the most useful part of the course for a recent graduate who ranked the class highly.
Futures and Forwards Course Objectives
After completing this course, participants will be able to:
- Describe the features and characteristics of futures and forwards
- Define a futures contract
- Demonstrate how to price a futures contract
- Apply futures contracts for speculating and hedging
- Identify the risks associated with futures
- Compare and contrast futures and forwards
Program Level: Foundation
Advance Preparation: None
Recommended CPE Credits: 7
- Session 1: Futures and Forwards will cover the brief history of futures contracts, the features and characteristics of cash, futures and forwards markets, and highlighting their differences. Over the counter, or OTC, transactions and futures exchanges will be defined, as well as the payoff profile of long and short positions. A review of the different asset classes that underlie various futures contracts, different market participants, and the different global futures exchanges will be identified.
- By the end of Session 2: The Futures Contract versus Forwards, participants will be able to list the standardized features of futures contracts, including T-notes, Eurodollar, and the S&P 500. They will be able to identify settlement procedures and define initial, variation, and maintenance margin, and mark-to-market procedures. Leverage will be discussed and assessed. FRA settlement procedures, the role of OTC clearinghouses and Continuous Linked Settlement (CLS) will be explained, and implications due to the Dodd Frank Act (DFA) will be highlighted.
- Session 3: Pricing Futures and Forwards will teach participants to identify components of the forward/futures price, calculate a forward price, and define forward curves. A discussion on the economic and political variables that impact price will also occur.
- After Session 4: Futures and Forward Applications, participants will be able to evaluate speculation on T-notes futures, S&P 500 futures, and FRAs. They will analyze how treasury desks use futures, how interest rate swap desks use Eurodollar futures and FRAs, and how corporations use FX forwards. The process of calculating Eurodollar strips and their role in pricing other derivative products will also be explained.
- The final session of the course, Session 5: Risks and Risk Management will enable participants to identify the different risks that are associated with futures and forwards. The risk management process is reviewed, including a discussion of different trading limits associated with futures vs. forwards.