ABSTRACT
In this chapter we study the concept of forward contract, an OTC agreement between two parties where one of them agrees to buy (and the other one agrees to sell) an underlying asset at some future time T and at some predetermined delivery price F. We also study a similar derivative: a futures contract, whcih similar to a forward contract, but traded throughout and exchange. The delivery price F is computed to make these contracts to be worth zero at inception, and the precise formulas are obtained via non-arbitrage arguments.
