Both statements made by Hania Ahmed in her article are incorrect. The relationship between the prices of forward and futures contracts and the correlation of the prices of the underlying assets with interest rates is the opposite of what she stated.

Regarding Statement I: When the prices of underlying assets are highly positively correlated with interest rates, the prices of futures contracts tend to be higher than the prices of forward contracts. This is because futures contracts are marked to market daily, which allows the gains or losses to be realized and reinvested at the prevailing (higher) interest rate. In contrast, forward contracts settle only at expiration, so this reinvestment benefit is not available.

Regarding Statement II: When the prices of the underlying assets are negatively correlated with interest rates, the prices of forward contracts tend to be higher than the prices of futures contracts. This is because forward contracts are not marked to market daily, which means the gains or losses are not realized until the contract expires. Therefore, the impact of changes in interest rates on the prices of forward contracts is less immediate than on futures contracts.

Key takeaway:

• Positive correlation between asset prices and interest rates → Futures prices > Forward prices
• Negative correlation between asset prices and interest rates → Forward prices > Futures prices

This is a classic result from the relationship between forwards and futures.