Off Market Forward: a futures contract in which the initial value of the contract is not set at zero and this value is exchanged between the buyer and the seller when opening. Remember that this is a zero-sum game: the value of the short position contract is the negative value of the long position. What is the initial value of a $300,000 mortgage that requires a 15% down payment? Simple economic logic suggests that the initial contract value is $45,000, or $0.15 x $300,000. This is the money that the lender asks to conclude the contract. The borrower also agrees to part with US$45,000 to secure the initial contract. To continue the example below, we assume that the initial price of Andy`s house is $US 100,000, and Bob takes a futures contract from today to buy the house for a year. But since Andy knows that he can sell for $100,000 and put the product in the bank, he wants to be compensated for the late sale. Assuming the risk-free return R (the bank interest rate) for a year is 4%. The money in the bank would increase to $104,000, without risk. So Andy would like at least $104,000 in a year to make the contract worth it for him – the opportunity costs will be covered. Apply this logic to futures. The vast majority of futures contracts are not counted.
If both parties are willing to exchange their contract obligation for 0$US, it follows that the initial value of the contract is zero. Futures contracts are purchase or sale agreements that determine the exchange of a given asset and at a specified future date, but at a price agreed today. They do not require advance payment or accounting, unlike other derivative instruments for future liabilities. .