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Define futures contracts in finance. Why do we need them? Give an example from Commodity, Currency...

Define futures contracts in finance. Why do we need them? Give an example from Commodity, Currency and Financial futures. Also, name one index futures from each category.

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Answer #1

FUTURE CONTRACT IS A CONTRACT BETWEEN TWO WHERE ONE AGREE TO BUY AND OTHER AGREE TO SELL ANY FINANCIAL INSTRUMENT ,COMMODITY , CURRENCY ETC IN FUTURE AT SPECIFIED PRICE/ RATE.

WE USUALLY NEED THEM TO HEDGE OUR POSITION AGAINST LOSSES THAT MAY OCCUR IN FUTURE DUE TO FALL OR INCREASE IN PRICE.

EXAMPLE OF

COMMODITY - OIL , GAS ,PRECIOUS METAL

CURRENCY FUTURE - USD/EURO , USD/GBP ETC

FUTURE INDEX NAMES

COMMODITY - GOLDMAN SACHS COMMODITY INDEX

CURRENCY - US DOLLAR INDEX

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