Question

What are financial futures contracts? What is meant by a short position in a financial futures? A long position? How are each of these affected by changes in interest rates? please help!!

Answer 1

Financial futures contracts are standardized contracts which will be helpful in hedging of various risk exposures in the financial markets. It will have two parties but those two parties are not predefined and this will be traded and executed accordingly before the maturity period.

Short position means having a negative view on a stock and selling the stock to gain from the downside of the stock.

long position means having a positive view on the stock and buying the stock to gain from the upside from this stock.

these are affected by the change in the interest rate because it will be impacting the overall value of this financial futures as increase in interest rate will be decreasing the overall value and decrease in interest rate will increase the overall value.