If you are short futures/forwards and the underlying is negatively correlated to interest rate , which one would you prefer?
You should prefer futures, right? Since as price goes down, your margin account gets larger, and you can reinvest at a higher rate?
The answer from Konvexity says you should invest in forwards.
Its forward, Konvexity is right.
It doesnt matter if you are short or long. You prefer futures when the underlying is positively correlated to interest rates, and you prefer forwards when it is negatively correlated.
Well appreciated, thank you!