Mechanics of Futures Markets | Financial Markets & Products | Lecture On FRM Video Lecture | Risk Management: An Essential Training - Management

simply learn your pace your place
financial risk manager frm part 1 of the
fr om exam covers the fundamental tools
and techniques used in risk management
and the theories that underlie their use
mechanics of futures markets welcome to
the second lecture in the module on
financial markets and products in the
earlier session we have explained to you
about the financial markets including
some basics of forwards futures and
options in this lecture as well as in
the following few lectures we will learn
about the forwards and futures market in
more detail this topic is very important
for an exam points of view and a few
questions especially on margin
calculations are most likely to be asked
let us begin our session agenda the main
agenda discussion will circle around the
operations of futures markets and
briefly about the forward markets we
will learn about the various features of
the futures markets such as contract
size delivery location delivery time
price quotations and tick signs daily
price limits and position limits who
will see how the spot or current stock
price and is futures price converge at
the expiry of the contract we will learn
how margin calculations are done by the
exchange you will also focus on the
types of orders and the settlement
process for the contract will end the
session by briefly discussing about the
regulating and accounting bodies
governing the futures markets features
of futures markets futures contracts
usually have a defined set of features
as given in the slide quality refers to
the type of asset and its quality such
as size color etc contract size is the
quantity of the asset that needs to be
delivered
to settle the contract delivery location
is the point of delivery while the time
refers to the time at which the asset
needs to be delivered price quotations
determine how the price will be quoted
such as dollars per barrel of crude and
minimum tick size is the minimum
movement in the price such as 0.25
dollars the daily price limit is the
maximum allowed to fluctuation over the
previous day while the position limit
sets a limit to the speculators open
position in order to prevent market
manipulations
future spot convergence easily