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Topic: Forward price


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In the News (Sat 25 May 19)

  
  Forward contract - Wikipedia, the free encyclopedia
The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands (on the spot date, usually next business day).
The difference between the spot and the forward price is the forward premium or forward discount.
Here, S is again the spot price of the asset, r is the risk-free force of interest and I is the present value of the net of dividends/coupons/rent less costs of maintaining the asset (discounted using r).
en.wikipedia.org /wiki/Forward_contract   (549 words)

  
 forward contract/forward price
A standard forward contract is an agreement to buy or to sell an underlying asset at a predetermined price on a single date in the future, where the terms are initially set such that the contract is costless.
This price is not to be confused with the current value at inception of the forward contract itself.
The forward price should not be confused with the present value of the forward contract, which is zero at inception.
www.in-the-money.com /glossarynet/forward_.htm   (495 words)

  
 BS&R: Regulation Z (11/26/2001)   (Site not responding. Last check: 2007-10-29)
Forward purchase contracts differ from forward equity sales transactions in that the counterparty purchases the shares to be covered under the contract directly in the open market.
If, at settlement date, the prevailing stock price is higher than the forward price, the counterparty sells to third parties the number of shares necessary to cover its costs3 and remits the remaining shares to the banking organization to be retired as treasury stock.
For example, if an institution has entered into a forward equity transaction and subsequently experiences financial deterioration, it is likely that the institution's share price would reflect this stress and would have declined to a price lower than the forward price fixed in the agreement.
www.frbsf.org /banking/letters/2001/bsr.011121.html   (1259 words)

  
 forward price Definition
Forwards are priced in a manner similar to futures.
As with a futures contract, the first step in pricing a forward is to add the spot price to the cost of carry (interest forgone, convenience yield, storage costs and interest/dividend received on the underlying).
However, unlike a futures contract, the price may also include a premium for counterparty credit risk, and there is not daily marking-to-market to minimize default risk.
www.investorwords.com /5579/forward_price.html   (290 words)

  
 WWWFinance - Forward and Future Contracts
The price of a foreign exchange forward contract, for example, depends on the price of the underlying currency and the price of a pork belly futures contract depends on the price of pork bellies.
The spot price is the price of an asset where the sale transaction and settlement is to occur immediately.
Suppose the spot price of wheat is 550 cents per bushel, the six-month forward price is 600, the riskless rate of interest is 5% p.a., and the cost of carry is 6% p.a.
www.duke.edu /~charvey/Classes/ba350_1997/futures/lecture.htm   (7190 words)

  
 Pricing Georgia Farm Products Through the Futures Market
Forward pricing (pricing before delivery) is an alternative producers should consider either to lock in acceptable profits, make management decisions, or perhaps even to secure financing.
The USDA carcass prices are taken from all the major packers across the country, representing almost all the hogs sold on a carcass basis during the day.
When prices rise after the hedge is set, a profit in the futures market results to offset the higher price you have to pay for the corn in the local market.
www.ces.uga.edu /Agriculture/agecon/pubs/marketpubs/price524.htm   (6718 words)

  
 Forward Prices
By extension, we may say that the forward price for a bundle of claims that share the same payment date, but differ only in the states of the world in which they are to be paid is the amount to be paid with certainty at the common date for which the bundle can be obtained.
Prices will be set, valuation can be performed, replicating strategies can be determined, packages of state-contingent claims can be valued using atomic prices or the combination of atomic forward prices and discount factors, and so on.
The forward value of a set of claims for a given time period could be interpreted as the expected value of the payments if only the atomic forward prices were probabilities.
www.stanford.edu /~wfsharpe/mia/prc/mia_prc5.htm   (2602 words)

  
 [No title]   (Site not responding. Last check: 2007-10-29)
Forward derivatives will be of larger importance for bandwidth than for many conventional commodities because bandwidth cannot be stored for later use whilst forward-based contracts are storable over their lifetime (creation to maturity).
A forward contract is defined as a contract in which capacity is bought today to be used starting at a fixed date in the future and for a fixed duration.
Forwards and Futures: By convention a forward contract is a transaction between two individuals whereas a futures contract is an exchange-traded instrument.
www.wipo.int /cgi-pct/guest/getbykey5?KEY=02/85044.021024&ELEMENT_SET=DECL   (7980 words)

  
 Pork Producers and the Futures Market
The actual corn price paid is $.05/bu higher than the target purchase price because the basis at the time the cash corn is purchased is $.05/bu hi her than anticipated.
For example, the difference between the cash price of hogs in January (for which there is no futures contract) and the February futures contract will depend on the supply of and demand for hogs anticipated by the futures market in February vs the actual supply and demand in January.
To convert a carcass price to a live price, multiply by the percentage a live hog is expected to yield as a carcass.
www.ces.uga.edu /Agriculture/agecon/pubs/marketpubs/pih17.htm   (5147 words)

  
 Agricultural Economist: No. 691 Winter 1998 Article 2
Increased price volatility associated with shifts in export demand and in international monetary conditions is expected to result in substantial variability in annual farm income.
Given the expected similarity of risk management objectives of farmers using forward pricing contracts and/or government programs, the surveyed farmers were asked to indicate if past government support had reduced their need to use forward pricing contracts.
Our analysis of the characteristics of the farmers and their farming operations suggests that several factors may influence the choice of a particular forward pricing strategy and the type of forward pricing contract that is used.
www.extension.umn.edu /newsletters/ageconomist/components/ag237-691b.html   (1935 words)

  
 [No title]   (Site not responding. Last check: 2007-10-29)
Infer the spot price of an ounce of gold if you observe the price of one ounce of gold for forward delivery in three months is $435.00, the interest rate on a 91-day Treasury bill is 1% and the quarterly carrying cost as a percentage of the spot price is.2%.
You observe that the current spot price per ounce of kryptonite is $180.00, the forward price for delivery of one ounce of kryptonite in one year is $205.20, and annual carrying costs of the metal are 4% of the current spot price.
The forward price for a share of stock to be delivered in 182 days is $410.00, whereas the current yield on a 91-day T-bill is 2%.
core.ecu.edu /econ/rothmanp/ch14_IM_1E.doc   (1093 words)

  
 Illustration from KPMG
MBS is concerned with the fluctuations of the price of silver during the commitment period (i.e., the inventory would be recorded at other than market price at the date of purchase).
The forward contract is designated as a fair value hedge of MBS's firm commitment to purchase 100,000 ounces of silver from JAE in six months.
Given that the critical factor for the forward contract is 100,000 ounces of silver, MBS concluded that changes in the discounted fair value of the forward contract will be highly effective at offsetting changes in the fair value of MBS's firm commitment to purchase 100,000 ounces of silver at $4.99 per ounce.
www.trinity.edu /rjensen/acct5341/examples/KPMGexamples/04-13.htm   (775 words)

  
 Look forward for price signals   (Site not responding. Last check: 2007-10-29)
Today's roller-coaster cattle prices are largely attributable to extended drought in the western U.S. and western Canada, and the cattle cycle's delayed turnaround phase.
Finishing backgrounded calves to be harvested in June 2003, after the seasonal price peak, however, is projected to be about a breakeven deal at best and may even generate a negative return.
While these prices follow the historical seasonal index, the magnitude of the market-price ups and downs are projected to be larger this year.
beef-mag.com /mag/beef_look_forward_price/index.html   (860 words)

  
 Wilmott Forums - Current Value of Forward Price of Bond with Credit Spread
Both of these are methods for computing the present value of the bond minus the first coupon payment, but the forward price must be compounded forward to the delivery date.
I was just seeking confirmation that the current value of the forward price comes out as the spot price minus the discounted coupon payment, with this discounting being done at the shifted rate rather than the LIBOR rate.
A standard forward contract would not be, but some arrangements modeled as a forward contract have this feature.
www.wilmott.com /messageview.cfm?catid=3&threadid=22110   (572 words)

  
 Warren Buffett and Sherlock Holmes
He said that treasury bonds were paying ten percent and that the forward price for my stock should be based on this.
If the forward price is greater than the arbitrage price, you can make a guaranteed profit no matter what the market does.
Just as for the case of forwards discussed earlier, the principle is that if someone purchases a call option with a strike of 110 pounds for more than the current arbitrage value, the vendor can make an arbitrage profit.
www.sherlockinvesting.com /articles/tenpounds.htm   (4090 words)

  
 FRB: Supervisory Letter SR 01-27 on the use of forward equity transactions by banking organizations -- November 9, 2001
Accordingly, any common stock covered by forward equity transactions entered into after issuance of this letter will be excluded from Tier 1 capital.
Net share settlement - the difference between the prevailing market price and the forward price is settled in common shares.
In general, this SR letter does not apply to forward agreements associated with deferred compensation or other employee benefit plans, provided that specific transactions are marked to market at least quarterly and gains and losses are reflected in earnings.
www.federalreserve.gov /BoardDocs/srletters/2001/sr0127.htm   (1201 words)

  
 forward price and Stock Trading at TradeStars + Stock Trading   (Site not responding. Last check: 2007-10-29)
forward price and stock trading - fantastic savings on forward price in the quickest time possible with their famous traders pack.
restricted do not have an outstanding day traded forward price margin call, may execute day trades of marginable securities up to 4 times the maintenance surplus equity in the account at the start of the day.
Power for an forward price Account with an Outstanding Day Trade Margin Call If an account has an outstanding day trade margin call, or has been restricted for forward price failure to meet a day
www.tradestars.com /content/forward-price.asp   (163 words)

  
 A New Approach for Generating Forward Price Curves in Electricity Markets   (Site not responding. Last check: 2007-10-29)
Because a limited number of forward or futures contracts are traded in the market, only a limited picture of the theoretical continuous forward price curve is available to the analyst.
The objective function ensures both smoothness of the curve and that the curve follows the seasonality of the price forecast of a bottom-up model.
Section 2 discussed electricity forward and futures prices, Section 3 presents the model, Section 4 reports on tests of the quality of the generated curves and Section 5 concludes.
www.energyforum.net /feature/feat159.shtml   (696 words)

  
 [No title]
Assuming that the continuously compounded riskfree rate of return is 5%, determine the arbitrage-free one-year forward price of gold on September 1, 2000.
Assuming that the continuously compounded riskfree rate of return is 5%, determine the value of a long position on the forward contract of the previous example on March 1, 2001.
Since you have a long position and the settle price on August 30 was lower than the price at which you bought the futures contract, your loss on August 30 was: $6,400 [=(11,300-11,268)*10*20].
home.gwu.edu /~alexbapt/lectur23.ppt   (1035 words)

  
 [No title]
The owner of the long forward contract is not entitled to receive the dividend, because she only has a claim to buy the stock in the future for a given price, but she does not own it yet.
The profit of a long forward contract with a price for delivery of $53 is equal to:  EMBED Equation.3 , where  EMBED Equation.3  is the (unknown) value of one share of XYZ at expiration of the forward contract in one year.
In order to find the S&R index price at which the call option and the forward contract have the same profit, we need to set both parts of the maximum function of the profit of the call option equal to the profit of the forward contract and see which part permits a solution.
www.nlu.edu /~mingli/CHAPTER2_hw.doc   (2491 words)

  
 [No title]
A Forward agreement to purchase an asset: S0 = current spot price F0 = current forward price for settlement at a future date T rf = risk-free rate (precludes arbitrage) T = length of time until settlement F0 = S0 (1+rf)T Forward Rate Agreement (Forwards) Ex.
Forward Rate Agreement (Forwards) Important: Generally, forwards are entered into at zero cost to both parties.
Forward Rate Agreement (Forwards) What is the value of a forward after the contract has been initiated?
faculty-staff.ou.edu /L/Lawrence.W.Licon-1/5043Lecture11.DOC   (929 words)

  
 [No title]   (Site not responding. Last check: 2007-10-29)
The bond price is $950 today and the risk-free rate is 8% per year.
If asset price is positively correlated with interest rates, futures prices tend to be higher then forward prices.¡ÝÝó'3Ÿ¨'Forward Price vs. Futures Price (cont.)¡((Ÿ¨ÂIf asset price is negatively correlated with interest rates, futures price tend to be lower than forward prices.
The spot price is $450, and the risk-free rate is 7% per year Recall¡4 ô ó ó7,Ÿ¨Gold Futures (cont.)¡Ÿ¨# T-t = 1 year r = 0.07 St = $450 ¡t$  çÿó8-Ÿ¨The Cost of Carry¡Ÿ¨¯The storage cost.
www.smeal.psu.edu /faculty/qxc2/backup/3.ppt   (1124 words)

  
 Price-Earnings Ratio - P/E Ratio
For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).
EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E).
A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
www.investopedia.com /terms/p/price-earningsratio.asp   (356 words)

  
 S-WoPEc: On Finite Dimensional Realizations of Forward Price Term Structure Models
The first system is a standard HJM model for (forward) interest rates, driven by a multidimensional Wiener process W. The second system is an infinite SDE for the term structure of forward prices on some specified underlying asset driven by the same W. We are primarily interested in the forward prices.
However, since for any fixed maturity, T, the forward price process is a martingale under the T-forward neutral measure, the zero coupon bond volatilities will enter into the drift part of the SDE for these forward prices.
to investigate under what conditions on the volatility structure of the forward prices and/or interest rates, the inherently (doubly) infinite dimensional SDE for forward prices can be realized by a finite dimensional Markovian state space model.
swopec.hhs.se /hastef/abs/hastef0569.htm   (330 words)

  
 [No title]   (Site not responding. Last check: 2007-10-29)
You enter into a forward contract to buy a 10-year, zero-coupon bond that will be issued in one year.
25.9 The forward price (f) of a contract on an asset with neither carrying costs nor convenience yield is the current spot price of the asset (S0) multiplied by 1 plus the appropriate interest rate between the initiation of the contract and the delivery date of the asset.
Calculate the price and duration of each bond if the market interest rate is 10% per annum (Effective annual yield).
finance.wharton.upenn.edu /~voetmann/fall03/rwj/Chapter25QuestionsV2.doc   (1776 words)

  
 [No title]   (Site not responding. Last check: 2007-10-29)
Example: Long Forward Position vs. Short Forward Position (Forward Price = $20/barrel of oil) A long forward position of 1,000 barrels of oil at a price of $20/barrel with a one-year maturity obligates the user to buy the 1,000 barrels of oil in one year for $20,000.
A short forward position of 1,000 barrels of oil at a price of $20/barrel with a one-year maturity obligates the user to sell the 1,000 barrels of oil in one year for $20,000.
A futures contract is like a forward except it is marked to market on a daily basis as opposed to settling at maturity.
rider.wharton.upenn.edu /~martin96/corp1127.doc   (1128 words)

  
 Chapter 3
A stock trades at $50 and is expected to pay a $2 dividend after two months.
Is forward price the same as futures price?
The interest rate in the US is 1% and in the UK it is 4%.
www.csuchico.edu /~rponarul/fin257/ch03.htm   (230 words)

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