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A futures market is a central financial exchange where people can trade standardized futures contracts. A futures exchange provides physical or electronic trading venues, which can be organized as non-profit member-owned organizations or for-profit organizations. Futures exchanges can also be integrated under other types of exchanges, such as stock markets, options markets and bond markets.
Futures contracts are sometimes used by corporations and investors as a hedging strategy. Hedging refers to a range of investment strategies that are meant to decrease the risk experienced by investors and corporations.
Quesion 1 Review and discuss the collapse of the Futures Oil Market, which fell into the negative realm in May 2020.
Question 2 What were the main reasons for this fall into the negative realm? Critically discuss.
Question 3 After May 2020, what are the prospects of futures contracts as a significant risk management tool for firms? Discuss critically.
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