A futures contract based on a financial instrument.
This term requires you to look ahead, to plan and to budget, for what you what down the road. You should consider your financial future when making purchases and choices.
A contract entered into now that provides for the delivery of a specified asset in exchange for the selling price at some specified future date.
When the underlying investment of a futures contract is a financial product, such as certificates of deposit (CDs), US Treasurys, US agency bonds, or overseas currencies, the contract is described as a financial future. Generally, the contract changes in value in response to changes in the interest rate. Increases in the rate produce falling contract prices, while drops in the rate produce rising contract prices. In most cases, the hedgers who use these contracts are banks and other financial institutions who want to protect their portfolios against sudden changes in value triggered by changing interest rates.
A financial future is a futures contract on a short term interest rate (STIR). Contracts vary, but are often defined on an interest rate index such as 3-month sterling or US dollar LIBOR.