contract for difference (CFD)

yoshimura1 · February 6th, 2009, 1:58 pm

hello, could someone tell me how to price a CFD (equity)? thanks.

daveangel · February 6th, 2009, 2:08 pm

there is nothing to price. if you go long through a CFD you get the daily +ve returns or pay the daily -ve returns and you also pay the funding cost. its just like owning the equity

mstrabo · February 6th, 2009, 4:12 pm

There are often tax advantages associated with CFDs depended on the entities you trade with, hence can be a way of minimizing your tax liabilities.

freddiemac · February 8th, 2009, 10:53 am

Dont forget that you have counterparty risk with a CFD, eg CMC is a big CFD bank for individuals. If CMC were to default and you would have positive MTM then that would be lost (or rather it would be an unprioritized claim in the bancruptcy proceedings).