When the correlation between interest rates and the underlying is positive: A. Prefer Forwards B. Prefer Futures C. Prefer Off Market Forwards D. Prefer Options
Prefer futures, since they benefit from mark to market and can reinvest at higher rate.
b fo sho
and if negatively correlated . . .
If -ly correlated you would prefer any of the others to futures.
I didn’t spend thousands of dollars to write it though. What if the underlying had cash flows, would options not be preferred?
If someone says want a free option or a free forward, take the option. It’s kinda hard to compare which you would rather have given that options cost $ and forwards don’t (off market forwards do, of course).
I need to learn to think that way. Eventually