Financial Futures

1. Stock Market Index Future

1.1. A cash-settled futures contract on the value of a particular stock market index.

1.2. Stock index futures are used for hedging, trading, and investments.

1.2.1. Investing via the use of stock index futures could involve exposure to a market or sector without having to actually purchase shares directly.

1.2.2. Hedging using stock index futures could involve hedging against a portfolio of shares or equity index options.

1.2.3. Trading using stock index futures could involve, for instance, volatility trading

2. 1. Interest Rate Future

2.1. Type of interest rate derivative.

2.2. Examples include Treasury-bill futures, Treasury-bond futures and Eurodollar futures.

2.3. Used to hedge against the risk that i rates will move in an adverse direction, causing a cost to the company.

3. Forex Futures

3.1. Exchange-traded contract to buy or sell a specified amount of a given currency at a predetermined price on a set date in the future.

3.2. Investors use these futures contracts to hedge against foreign exchange risk.

3.3. Most contracts have physical delivery, so for those held at the end of the last trading day, actual payments are made in each currency.