Derivatives are financial instruments (contracts) whose value is based on (or derive from) other underlying financial assets. Parties to a derivative contract agree to buy/sell some financial asset at a future date (forwards) 13, to swap specific cashflows (swaps), or to obtain a right to or assume an obligation to buy/sell some financial asset at (by) a future date (options). Since there is no need for parties to a derivative contract to take positions in the underlying asset, it is less costly and thus enables more efficient risk management. Q15: Regarding UL13, forward contracts for an asset should be priced so that the same result would be reached from entering into a forward contract or from buying that asset now and holding it until the date of sale/purchase agreed in the contract. If crude oil is trading currently at $40.00 per barrel what should be the forward price from now? Assume that one-year interest rate for US dollars is 1% and storage cost (to be paid at the end of storage period) for a barrel of oil for one year is $1.00 (round to two decimal places). one year