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Commodity Derivatives

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Hello Sir, In this problem, or generally, can we not settle futures with actual goods? In that case we wont have to take the extra 1 rs loss (diff in spot and future price) Video Details Advanced Financial Management - AFM Derivatives Analysis and Valuation 148. O - Illustration #31

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Susee Arunachalam

Susee Arunachalam

CA Final

26K+

02-Apr-24 21:45

56

Answers (3)

Best Answer

Even if you settle with actual good, net gain loss will be same. In current case you will settle the contract with some gain / loss. Add that to the price realized on spot on date of sale - add all the numbers and you will notice that net price paid / received is same. However there may be a scenario ( very rare) in which on date of settlement futures and spot have slight variation - in such a case both may not give same results - but in real life and practically both scenarios, what you mentioned vs what we solved in the Q will have same net cash gain / loss


Sriram Somayajula

Sriram Somayajula

Admin

03-Apr-24 10:23

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