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Master the fundamentals of pricing financial forwards and futures contracts in this comprehensive 47-minute tutorial designed for FRM Part 1 candidates. Learn to define and describe financial assets while understanding the mechanics of short-selling and calculating net profits from short sales of dividend-paying stocks. Explore the key differences between forward and futures contracts and grasp the critical relationship between forward and spot prices. Develop skills to calculate forward prices using underlying asset spot prices and construct arbitrage arguments between spot and forward prices. Distinguish between forward price and forward contract value, then calculate values for forward contracts on financial assets with and without income or yield. Understand the relationship between forward and futures prices while mastering stock index futures contract valuation and index arbitrage concepts. Gain practical knowledge through stock index futures examples, cost of carry models, dividend and yield considerations, forward valuation before maturity, and both cash-and-carry and reverse cash-and-carry arbitrage strategies, all enhanced with targeted exam preparation tips from a GARP-approved provider.
