Futures (SAP Library

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 Master Data ® Listed Derivatives ® Class you can create, change and display the following futures as a Class in the system:

Securities futures (bonds)

Interest futures

Index 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 DEM and hopes to reach this goal by selling the bonds.

Steps to take:

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

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

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

For the investor to enter into the transaction, the price of the forward transaction when the contract is concluded must be such that the investor is not worse off than he would otherwise have been with the first option. 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. In the end, the total of these cash flows corresponds to the strike price agreed.

Procedure

Entering basic data

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

Names
Exchange (issuer, calendar)
Dates (last traded on, last working day, delivery day)
Tick (tick in % points, tick value, tick currency)
The 3 products differ in the Underlying area:

Example Examples:

Securities futures: Underlying fictitious bond, such as 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 futures: Underlying reference interest rate, such as 1 month Libor with nominal value 1,000,000.00 ® Interest calculation method 2 ® Reference interest rate DEM 03 M middle ® Nominal currency DEM

Index futures: Underlying security index, such as DAX with security index point value 100.00 ® Currency index point DEM

Other tab pages

Search Terms

Exchanges

Regulatory Reporting

User Data

Additional functions

This graphic is explained in the accompanying text

Check

This function 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

You can use this function when you are in the change mode. It resets the class data to the status it had when it was last saved.

References

Here, the system displays a list of the class data, which uses the current security ID number as the underlying.

Class: Reference

You can branch to the Issuer data for the relevant business partner from the class data. To do this, choose Environment ® Display issuer.

By choosing Environment ® Change documents from the menu, you can display the change documents for the class data.

The status of a class is displayed at the top right-hand side of the screen. You can either change the status there or choose Edit ® Change status. A class can have either be obsolete, inactive, or active.

Save your entries before you leave the class data.