Financial Future

Financial future

A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.

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Financial Future

A futures contract on a financial product. Examples of financial futures include trading on currencies, stock indices, and Treasury securities. In a financial future, the counterparties agree to trade the underlying financial product at a certain time for a certain price. Some financial futures are settled in cash, especially if the underlying assets are indices. Financial futures may be traded like other futures.

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Financial future. When a futures contract is linked to a financial product, such as a stock index, Treasury notes, or a currency, the contract is described as a financial future.

In most cases, the hedgers who use financial futures contracts are banks and other financial institutions that want to protect their portfolios against sudden changes in value.

The changing prices of a financial futures contract reflect the perception that investors have of what may happen to the market value of the underlying instrument.

For example, the price of a contract on Treasury notes changes in anticipation of a change in interest rates. Expected increases in the rate produce falling contract prices, while anticipated drops in the rate produce rising contract prices.