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| Details |
Case Code: CLFIN008
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| Case Length: 6 pages |
| Period: - |
| Pub Date: 2017 |
| Teaching Note: Not Available |
| Subject : Finance |
| Price:Rs.100 |
| Organization :National Commodity & Derivatives Exchange Limited |
| Industry :Financial Markets |
| Countries : - |
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Manohar in the Wonderland of Derivatives |
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| This case study is about the dilemma faced by Manohar, a wheat farmer who wanted to hedge his price risk. Unable to lock the price using a traditional Forward contract, he is exploring the possibility of a Futures contract on a commodity stock exchange. The case study introduces Forwards and Futures while going deeper into exploring the trading process and other requirements of a Futures contract..
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Issues: |
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- Understand what a Futures contract is.
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- Understand what a Forward contract is.
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- Understand the difference between Forward and Futures contracts
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- Understand how a Futures contract is used to hedge risk
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- Analyze the trade mechanics of the Futures market
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- Analyze the role played by a clearing house in a Futures contract.
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| Introduction |
| It was the night of June 6, 2015. Manohar, a 25-year-old farmer, tossed and turned in bed, unable to sleep. In his mind, he kept hearing the words of advice his childhood friend, Ramesh, an MBA student, had recently given him. With those words haunting him now, he wondered what to do. Manohar came from a conservative background, and found himself faced with a dilemma. Was it really good to think outside the box? But whichever way he looked at it, Ramesh’s idea didn’t seem to have any major shortcomings. Gathering up courage, Manohar decided to go to New Delhi with Ramesh so that he could get more information and implement the idea.....
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Keywords |
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Futures contract, Forward contract, Clearing house, Contract Size, Daily Settlement, Margin, Physical Delivery Settlement, Offsetting, Cash Settlement, Exchange Of Futures For Physicals, Price Discovery, Arbitraging, Speculation, Hedging, CME Group.
* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US
$16) per copy.
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