CFAI online question - Ryan Parisi Case Scenario (2)

CFA Level II Derivatives
#1

“Parisi proceeds to review an equity forward contract held by Quantum. The contract was initiated thirty days ago when the fund expected a large inflow of cash in 60 days. In order to hedge against a potential rise in equity values over this period , Quantum entered into a long forward contract on the UAX 300 Index expiring in 60 days.”

I have difficulty understanding how equity forward contract works. Why do we need to worry about potential rise in equity value? Shouldn’t the value be fixed as per contract?

#2

I think this means Quantum is in position of shor the contract, which means it will pay the counterparty any return realized by the equity market, assuming the question didn’t tell the position of Quantum.

#3

thanks! that makes sense now.