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Why no IR risk for futures
Can someone please explain me the difference between a future and a forward due to which there is no interest rate risk in futures. The reason given is that the future are marked to market daily(by exchange) while forwards are not. Can someone explain it in more detail??To me to simulate long future/forward contract, one needs to borrow cash at certain interest rate and purchase the spot and hold it to maturity. This basically suggests both contracts have interest rate risk.thanksManas
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- Martinghoul
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Why no IR risk for futures
What sorts of futures might you be referring to?
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- Martinghoul
- Posts: 188
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Why no IR risk for futures
QuoteOriginally posted by: bmanascommodity futuresIt's not a question of there being no interest rate risk. It's a question of the correlation of the price of the underlying with rates.Would it be OK to refer you to Hull, chapter 3.9? He's much better at explaining it than I could ever hope to be...