- CFA Exams
- CFA Level I Exam
- Topic 7. Derivatives
- Learning Module 5. Pricing and Valuation of Forward Contracts and for an Underlying with Varying Maturities
- Subject 1. The Concept of Pricing vs. Valuation
CFA Practice Question
Subsequent to the initiation date, ______
B. the price of the forward contract can fluctuate.
C. both the value and the price of the forward contract can fluctuate.
A. the value of the forward contract can fluctuate.
B. the price of the forward contract can fluctuate.
C. both the value and the price of the forward contract can fluctuate.
Correct Answer: A
The value can become significantly positive or negative, but the forward price will remain the same.
User Contributed Comments 5
| User | Comment |
|---|---|
| aparmar | explain? |
| sahilb7 | The price of a forward contract is always fixed (i.e. forward price). However, once the contract starts the spot price may vary on the basis of various factors. This may lead to a change in the value of the contract. |
| alex2001 | Thanks Sahilb7, very helping. |
| khalifa92 | value is the gain and losses |
| khalifa92 | S0 is price time 0 - PV discounted cash flows = Value |