On page 438 of the book, question 8, says that forward commitments provide “linear payoffs.” I don’t understand what this means. Can someone explain? For example in a future, you go long and say I will buy x in 6 months at $50. What is the linearity in that?
Same question, B) is wrong because forward commitments depend on the outcome or payoff of an underlying asset. But I don’t see why that is the case since with a future you agree now what price you will pay for x asset on the future date. So how does the forward commitment depend on the outcome of the underlying asset?