Futures

Definition

A future is a forward transaction traded at a forward exchange, which is binding for both parties . It has a standardized issue structure. You enter the standardized contract elements in the class master data . As with all forward transactions, the price is the current daily price plus the finance costs.

Structure

By choosing Start of the navigation path Master Data Next navigation step Listed Derivatives Next navigation step Class, End of the navigation path you can create, change and display the following futures as a class in the system:

  1. Securities futures (bonds)

  2. Interest futures

  3. Index futures

  4. Commodity Futures

See also:

Editing a Class

Use

Example :

An investor has a position of fixed-interest bonds.

Target :

At the start of the next quarter, he requires 250,000 EUR and hopes to reach this goal by selling the bonds.

Measure:

To protect himself against price fluctuations, he has two options:

  1. He sells the securities today at the market price and invests the money he receives in fixed-term deposits.

  2. He holds on to the securities and sells a bond futures contract.

The price of the forward transaction at the time of conclusion of the transaction must be such that the investor is not worse off than the he would be with the first option. Otherwise, he will not enter into the transaction. This is his best option at this moment in time, otherwise he would find no counterparties.

Result:

The conclusion of the forward transaction on the due date is not at the fixed forward price but at the market price valid at the time. During the term of the future, the settlement price is determined on a daily basis and profits and losses are cleared immediately (variation margin) using this price. At term end, the sum of these cash flows corresponds to the strike price agreed.

Procedure

Entering Basic Data

To create a future, you must fill the following fields:

  • Name

  • Exchange (issuer, calendar)

  • Dates (last trading day, last working day, delivery day)

  • Tick (tick in % points, tick value, tick currency)

  • There are 3 product types in the Underlying :

    Example Example

    Examples:

    Securities futures: Underlying fictitious bond, such as Bund future with nominal value 250,000. Start of the navigation path 00 Next navigation step Interest calculation method 2 Next navigation step Percentage rate 6 Next navigation step Nominal currency EUR Next navigation step Final due date 02/03/2006 End of the navigation path

    Interest futures: Underlying reference interest rate, such as 1 month Libor with nominal value 1,000,000. Start of the navigation path 00 Next navigation step Interest calculation method 2 Next navigation step Reference interest rate EUR 03 M middle Next navigation step Nominal currency EUR End of the navigation path

    Index futures: Underlying security index, such as DAX with Start of the navigation path security index point value 100.00 Next navigation step Currency index point EUR End of the navigation path

    End of the example.
Other Tab Pages
Additional Functions

  • Check

    This checks the class for consistency. Any errors that occur here are displayed in a dialog box. The same checks are carried out when you save the class.

  • Reset

    This function is available in the change mode. It resets the class data to the status it had just after it was last saved.

  • References

    This function lists the classes that use the current security ID number as the underlying.

    Class: Reference

  • You can branch to the Issuer data of each business partner from the class data. To do this, choose Start of the navigation path Environment Next navigation step Display Issuer End of the navigation path .

  • You can display the change documents for the class data by choosing Start of the navigation path Environment Next navigation step Change Documents End of the navigation path .

  • The class status is displayed at the top right-hand side of the screen. You can either change the status there or choose Start of the navigation path Edit Next navigation step Change status. End of the navigation path A class can have the status obsolete, inactive, or active.

Save your entries before you leave the class data.

For information about position management and valuating futures, see Futures Valuation .