In CFA curriculum, it mentioned that Forward is better than Future, when underlying asset value is negatively related to interest rate.
But I have the following different thought, pls could someone help see if my thought has any problem or not. Thanks.
------------------ My thought is: ------------------ Future is always better than Forward, when the underlying asset value is going up, regardless underlying asset value is positively or negatively related to interest rate. The reasons are: 1. It is always good to have mark-to-market to get the cash earlier for reinvestment, regardless the interest rate is high or low.
- Forward locks the cash gain as it doesn’t have mark-to-market settlement, and this locked cash gain doesn’t generate any benefit because it will not cause the underlying asset value to be higher in the future. Such cash locking is useless, and wastes the opportunity of providing cash earlier for reinvestment.