This is just superb, I've been looking for "trade mispricing transfer pricing" for a while now, and I think this has helped. Have you ever come across - Genubrey Mispriced Infiltration - (Have a quick look on google cant remember the place now ) ? Ive heard some interesting things about it and my friend got excellent success with it.
A simple yet elegant, precise and understandable treatise on forward contracts which are the basis of futures commodity contracts and why the maligned "speculators" actually provide an extremely valuable service to producers and consumers.
@2:30 You said Forward Contract (FC) is an obligation for both parties. On Investopedia, it says "...there may be a chance that one party will default." because it's a private agreement.
To my understanding, a futures contract is traded on a regulated exchange, while a forwards contract is usually between two private companies. Also, futures are standardized to a contract size, so they can be more easily traded.
some help here please!! what happens if a purchase of forward contract and a discount was given on the forward rate?? should i add the discount or minus the discount on the spot rate and why??
question. so if the pie chain and farmer agree to a certain price, shouldn't that be the market price? why is there a price discrepancy between the supply and demand when they agree at a specified date? why the disequilibrium?
Because the market is much, much more bigger than one farmer and one pie chain. The price is determined by the aggregate supply and aggregate demand of one good :)
Prices change especially in farming, there's a huge price risk and price tends to differ in terms of availability. Beans is more expensive in my country during off season and considerably cheaper when it's in season. So when you have a forward contract with off season price the farmer tends to benefit more from such a deal when bean season comes
Really? Is the farmer obligated to sell his apples even though the contract does not say he must sell it to the chain? I mean, if prices have risen then naturally he can sell it to someone else at the higher market price. Genuine doubt.
In this example, its main purpose is to eliminate the risk of the price being unnatractive for both parties. They are basically protecting themselves against the every day volatility.
For some reasons, someone who made forward contract would not put the all quantity into the contract but just half of all quantity so the other half could be sold to other buyers with higher price if the price goes up.
+Tyler Gage pretty correct. It's simple: Futures are exchange traded - backed by a clearinghouse, while Forwards are "over-the-counter" custom contracts between two parties, not traded on an exchange. Futures are pretty much free of counterparty risk being on an exchange, while fwd contracts are not regulated.
Your drawings are pretty. Just thought you should know that. Also, thank you for the explanation.
This is just superb, I've been looking for "trade mispricing transfer pricing" for a while now, and I think this has helped. Have you ever come across - Genubrey Mispriced Infiltration - (Have a quick look on google cant remember the place now ) ? Ive heard some interesting things about it and my friend got excellent success with it.
A simple yet elegant, precise and understandable treatise on forward contracts which are the basis of futures commodity contracts and why the maligned "speculators" actually provide an extremely valuable service to producers and consumers.
im here because my professor failed to explain this in the classroom. SMH.
Everything in this video is perfect :) Thank you for the explanation :)
Claaaaasy class ! Fun to watch
I love the why you breaks these stuff in a very unique interesting way ..
Bravoooo
Nice video, you are providing a wonderful service to people all over the world! Keep up the good work.
Did Sal rlly drop that LOL the devotion. I love this guy!
this 3 minutes video managed to explain what a professor at the university of Manchester couldn't do in two two-hours lectures.
You sir...are an artist
Dang, I'm viewing videos from 13 years ago... Cool thing!!
This explanation of a "Forward Contract" was so comprehensive and compact that my 7 year old can NOW explain it to someone else!
Dude, YOU ROCK ... you really do!!!
Very good explanation sir,...
Crystal clear! Many thanks for the sharing!
Well explained 😊 thank you
Very easy to understand!
I really liked the example
Amazing explanation! Thank you
That pie farmer is a smart one.
very well explained
this is such a good illustration. Thank you!
This is very clear. Thank you so much!
so nice, so clear
great way to explain a thing ! nice drawing :)
This dude can draw...!
thanks à lot guys, ive learnt so much with you.
"The future is now, old man".... someone needs to say it...
So essentially the forward contract is just a delayed purchase/sell agreement.
You are such a genius! xD
Enki Denys I believe so, one that takes out the volatility of a periodic normal purchase\sell.
onfire4000 Purchase*
16542791
There you go. English is not my first language.
onfire4000 It is not mine either bro! ;)
i’m being very serious right now, can we have drawing tutorials?
You are just amazing
a good explanation along with the nice diagram.
damn man, the farmer looks like a boss.
Cool. I kill myself trying to learn this from official university book and here it is, one click and apple away :D
loved the drawings! :D
contact me on whatsappp +917517360803
Got confused when you stated saying pies per pound instead of apples per pound ha
I like the drawing :)
more visuals yay :P
@OsloBobby and also a mathematician, physicist, engineer, buisness man hedgefund analyst...... the list goes on
@Entelex
Who is the speculator in this forward contract? The producer or the chain?
@2:30 You said Forward Contract (FC) is an obligation for both parties. On Investopedia, it says "...there may be a chance that one party will default." because it's a private agreement.
What if everyone agrees for a future contract? Then it will be the fair market value?
How is the rate or cost for fixed vs fully optional contracts calculated? I mean why is a fixed contract cheaper than an optional one?
Contract between car insurance company and owner is which type of contract?
What is the difference between forward vs future contract? Same thing?
To my understanding, a futures contract is traded on a regulated exchange, while a forwards contract is usually between two private companies. Also, futures are standardized to a contract size, so they can be more easily traded.
@@SidKolli exactly
Sooo what if any side is unable to make good on their side of the contract?
sir...did you draw that with your mouse??!
some help here please!! what happens if a purchase of forward contract and a discount was given on the forward rate?? should i add the discount or minus the discount on the spot rate and why??
Who's storing and delivering these apples?
「コンテンツを調整する必要があります」、
can you use metric system please?
Apple farmer looks like he's about to harvest your soul
@JaoquinQ he has a MBA from harvard university, the best university in the world, he does not need to research cause he IS the source of information.
@randomwindowsstuffz Yeah, I already knew before you replied. I was at a hobby store and people have been compensating for shipping.
so how does an investor play into this? (someone who trades futures)
haha
Compare this to his 1+1 video. I've got a feeling his drawing ability has increased.
question. so if the pie chain and farmer agree to a certain price, shouldn't that be the market price? why is there a price discrepancy between the supply and demand when they agree at a specified date? why the disequilibrium?
Because the market is much, much more bigger than one farmer and one pie chain. The price is determined by the aggregate supply and aggregate demand of one good :)
Prices change especially in farming, there's a huge price risk and price tends to differ in terms of availability. Beans is more expensive in my country during off season and considerably cheaper when it's in season. So when you have a forward contract with off season price the farmer tends to benefit more from such a deal when bean season comes
So... Forward contracts were invented to protect against volatility. But, all traded commodity futures are extremely volatile. Irony?
@ilikechess1 he is a mafia leader in disguise.
isn't this future? a bit confused.
Really? Is the farmer obligated to sell his apples even though the contract does not say he must sell it to the chain? I mean, if prices have risen then naturally he can sell it to someone else at the higher market price. Genuine doubt.
thats an option. not a forward contract
In this example, its main purpose is to eliminate the risk of the price being unnatractive for both parties. They are basically protecting themselves against the every day volatility.
For some reasons, someone who made forward contract would not put the all quantity into the contract but just half of all quantity so the other half could be sold to other buyers with higher price if the price goes up.
@WhatCnaThisBe wacom tablet I guess
20 cents a pound? Gee Raplhs market ripped me off...
I'm sorry, are you just good at everything?
Is this really correct? If so, what is the difference between "Futures" and "Forward" contracts?
+Tyler Gage pretty correct. It's simple: Futures are exchange traded - backed by a clearinghouse, while Forwards are "over-the-counter" custom contracts between two parties, not traded on an exchange. Futures are pretty much free of counterparty risk being on an exchange, while fwd contracts are not regulated.