Risk glossary

 

Futures contract

 

An agreement between two parties, one to buy and the other to sell a fixed quantity and grade of a commodity, security, currency index or other good at a given price on a specified date in the future. Exchange-traded supply contract between a buyer and a seller, whereby the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of a commodity at a predetermined price at a specified location. Futures contracts are traded exclusively on regulated exchanges and are margined daily against a central counterparty (CCP), based on their current value in the market.

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