Domain of option trading strategies

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a) Both forward and futures contracts can be defined as "an agreement to buy/sell an asset at a future time for a certain price". However, besides this basic definition, forwards and futures are fundamentally different financial instruments. Analyse the major differences between forward and futures contracts.

b) Illustrate the historical simulation approach and the model building approach to estimating Value-at-Risk (VaR).

c) Illustrate the strategy called "long butterfly spread on call options" within the domain of option trading strategies. Make sure you discuss in detail the payoff table of the strategy.

Reference no: EM132546871

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