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Bursa Malaysia
Categories: Stocks, Investing and Trading,
stock exchange in Malaysia where financial instruments such as equities and derivatives are traded on a day-to-day basis. The Bursa Malaysia was originally known as the Singapore Stockbrokers' Association when it was established in the 1930s. As Singapore seceded from Malaysia to form its own government and currency, the Singapore Stockbrokers' Association evolved into a couple of different forms with different names, including the Kuala Lumpur stock exchange (KLSE), until it took its current form and became the Bursa Malaysia or Malaysia Exchange.
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Definition / Meaning of
Cash Forward Contract
Categories: Futures,
A cash market transaction in which a seller agrees to deliver a specific cash commodity to a buyer at some point in the future. Unlike futures contracts (which occur through a clearing firm), cash forward contracts are privately negotiated and are not standardized. Further, the two parties must bear each other's credit risk, which is not the case with a futures contract. Also, since the contracts are not exchange traded, there is no marking to market requirement, which allows a buyer to avoid almost all capital outflow initially (though some counterparties might set collateral requirements). Given the lack of standardization in these contracts, there is very little scope for a secondary market in forwards. The price specified in a cash forward contract for a specific commodity. The forward price makes the forward contract have no value when the contract is written. However, if the value of the underlying commodity changes, the value of the forward contract becomes positive or negative, depending on the position held. Forwards are priced in a manner similar to futures. Like in the case of a futures contract, the first step in pricing a forward is to add the spot price to the cost of carry (interest forgone, convenience yield, storage costs and interest/dividend received on the underlying). Unlike a futures contract though, the price may also include a premium for counterparty credit risk, and the fact that there is not daily marking to market process to minimize default risk. If there is no allowance for these credit risks, then the forward price will equal the futures price. also called forward contract.
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