Class Data - Futures 

Definition

A Future is a forward transaction traded at a forward exchange which is binding on both parties. It has a standardized issue structure. The standardized contract elements are entered in the Class master data. As with all forward transactions, the price is the current daily price minus the financing costs.

Structure

Via Master data ® Class data ® Futures, you can create, display and change the following:

  1. Futures - Securities (Bonds)
  2. Futures - Interest rates
  3. Futures - Stock indexes

Use

Example:

An investor has an asset balance of fixed interest bonds.

Target:

At the start of the next quarter, he requires 250,000 DEM which he wishes to raise via the sale of bonds.

Measure:

In order to protect himself against price fluctuations, he has two options:

  1. He sells the securities today at the current price and invests the money received in fixed-term deposits.
  2. He holds on to the securities and sells a bonds 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. At this moment in time, he can do no better, otherwise he will find no counterparties.

Result:

The conclusion of the forward transaction on the due date is not at the fixed forward rate but at the rate valid at the time. During the term of the future, the settlement rate is determined each day. Profit and loss are immediately cleared (variation margin) using this rate. The sum of these cash flows corresponds to the agreed strike price in the end.

Procedure

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

Examples

Security future: Underlying fictitious bond e.g. Bund Future with nominal value 250,000.00 ® Interest calculation method 2 ® Percentage rate 6 ® Nominal currency DEM ® Final due date 02/03/2006

Interest future: Underlying reference interest rate e.g. 1 month Libor with nominal value 1,000,000.00 ® Interest calcualtion method 2 ® Reference interest DEM 03 M middle ® Nominal currency DEM

Index future: Underlying security index e.g. DAX with Security index point value 100.00 ® Currency index point DEM

Via Extras ® Exchange, you get the name or short description of the exchange.