BQLearning - F&O Series: Standardisation Of Contracts And Role Of Exchanges
BQLearning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.
In this series we explain how the most commonly used derivatives - futures and options, work in equity markets, the advantages they offer and the risks associated with them.
A forward contract is the basis for a futures contract. But for it to work, a few conditions need to be met. Agreement on quantity and price of a security is one. That the contract will be upheld by the parties involved is another. This is where stock exchanges come into play.
This video explains the need to standardise contracts and the role an exchange plays in creating a markets for such derivative contracts.