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it's best classified as an option. When a certain event happens (car breakdown) the insurer must payout the damages. If nothing happens you keep paying the insurance company a monthly premium (for taking on the risk)
Concerning forward contracts, why does the short have to pay the long if the spot price is above the contract price ? If it's the case, the buyer makes a benefit on the actual price because he buys at a cheaper price, isn't he ? So why does he receive additional payment from the seller ?
The "additional payment" you mention IS the benefit. That is the nature of cash settlement: instead of carrying out the transaction, the difference (in this case in favor of the long) is settled. Think what would happen without the cash settlement: the short would have to sell at $50, netting her -$5, because she could have sold at $55 today. Long pays her $50 and then sells the asset for $55, netting her +$5. All this is equal to the short just paying the long $5.
You all probably dont give a shit but does anyone know a way to log back into an instagram account..? I somehow forgot my login password. I appreciate any assistance you can give me.
@Jayce Lane Thanks so much for your reply. I found the site through google and Im waiting for the hacking stuff now. Takes a while so I will get back to you later when my account password hopefully is recovered.
