ABSTRACT
Define a Forward contract for a risky asset and analyze it using the discrete binomial model. Generalize Cox-Ross-Rubinstein (CRR) to include varying interest rates and include this feature in Forward pricing. Define Futures contracts and margin accounts. Analyze Futures prices with the binomial model using the margin account. Compare Forwards and Futures prices to understand why they may differ. Compute the probability of default for different margin requirements.
