BOND FUTURE Meaning and
Definition
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A bond future is a financial derivative that represents a contractual agreement to buy or sell a specified government or corporate bond at a predetermined price on a future date. It is a standardized contract traded on a futures exchange, providing investors with a means to speculate on or hedge against future changes in bond prices.
In a bond future, the buyer agrees to purchase the underlying bond at a specified date in the future, while the seller agrees to deliver the bond at that date. The predetermined price, known as the futures price, is agreed upon at the time of the contract and is typically based on the expected future value of the bond.
Bond futures are widely used by institutional investors, such as banks, insurance companies, and pension funds, to manage interest rate risk or to gain exposure to the bond market without having to own the physical bonds. They allow investors to take either long or short positions on bonds, depending on their market expectations.
The settlement of bond futures contracts usually occurs through a process called cash settlement, where the difference between the futures price and the prevailing market price of the bond on the delivery date is settled in cash.
Overall, bond futures play a crucial role in financial markets, providing a means for investors to speculate on interest rates and bond prices, manage risk, and add liquidity to the bond market.
Common Misspellings for BOND FUTURE
- vond future
- nond future
- hond future
- gond future
- bind future
- bknd future
- blnd future
- bpnd future
- b0nd future
- b9nd future
- bobd future
- bomd future
- bojd future
- bohd future
- bons future
- bonx future
- bonc future
- bonf future
- bonr future
- bone future
Etymology of BOND FUTURE
The word "bond" originates from the Middle English word "bonde", which means a binding obligation or duty. This term comes from the Old English word "bonda", which refers to a householder or husband. The word "future" is derived from the Latin word "futurus", which means "about to be". In the context of financial markets, a "bond future" refers to a financial contract that represents a future obligation to buy or sell a specific bond at a predetermined price on a specified date.
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