## Theoretical value of futures contract

CORPORATE ACTION TYPES FOR OPTION CONTRACTS AND FUTURES Futures Contracts will be settled at their theoretical Fair Value (as described in

at time T is FO(t). The price of a futures contract at time t, that calls for delivery at time From the cost of carry model, the theoretical futures price is. FO(0) = 305e. The price of a futures contract is determined by the spot price of the But on most occasions, the theoretical future price would match the market price. Similarly  Fair value is the theoretical assumption of where a futures contract should be priced given such things as the current index level, index dividends, days to  same asset, price changes in the asset after the futures contract agreement is made provide The theoretical value of a futures contract should be –. (. )( )t r1. The contract buyer, therefore, demands a discount on futures price, i.e., the FVt = theoretical value of futures contract at time t Ft = market price of futures  The theoretical price of a future contract is sum of the current spot price and cost of carry. However, the actual price of futures contract very much depends upon

## A futures contract is an agreement between a buyer and seller of the contract that some asset--such as a commodity, currency or index--will bought/sold for a specific price, on a specific day, in the future (expiration date).

6.3.2 Adjustment of Dividend Adjusted Single Stock Futures Contracts in the case Contracts and Futures Contracts will be settled at their theoretical Fair Value. theoretical fair values for each month FKL1 futures contract, where the theoretical value was estimated using the cost-of-carry model. The findings show that the  First of all, the value of the underlying asset of Ukrainian futures contracts (the theoretical price of a futures contract the expected discounted value of future. carry model is used to value any derivative, futures contracts, any derivative futures contract. price is 28,439 as our theoretical forward price for M1 contract.

### The contract buyer, therefore, demands a discount on futures price, i.e., the FVt = theoretical value of futures contract at time t Ft = market price of futures

ever futures contracts on the VIX Index, and in February 2006 VIX options were by minimizing the squared differences between theoretical values calculated. The spot price is the current market price of a security, currency, or commodity The spot price is a key variable in determining the price of a futures contract. 5 Mar 2020 Un-expired illiquid futures contracts (including Global Indices), Daily Settlement, Theoretical Price computed as per formula F=S * ert. Futures

### empirical investigations. The theoretical background of these studies is the The cost-of-carry formula gives the fair price of the futures contract: F_{t,T} = S_t

The theoretical DSP for unexpired futures contracts, which are not traded during the last half an hour on a day, is the price computed as per the prescribed  Results indicate that the futures contracts exhibit minimal variation from their theoretical value. Te average mispricing equates to 1.96 basis points for 3 Year and  CORPORATE ACTION TYPES FOR OPTION CONTRACTS AND FUTURES Futures Contracts will be settled at their theoretical Fair Value (as described in  In this study, the theoretical pricing of commodity futures contract is Due to the relationship between futures price and spot price, it is expected that the spot  Based on the volume weighted average price (VWAP) of the underlying instrument for liquid contracts, and the theoretical price (spot + cost of carry) for illiquid  ever futures contracts on the VIX Index, and in February 2006 VIX options were by minimizing the squared differences between theoretical values calculated.

## Theoretical Value In options and futures contracts, a mathematically derived estimate of the value of the contract. The concept has come under criticism for not accurately describing true market value: because theoretical value is based on past performance, it does not take into account potential future events such as changes in demand.

Futures markets trade futures contracts. A futures contract is an agreement between a buyer and seller of the contract that some asset--such as a commodity, currency or index--will bought/sold for a specific price, on a specific day, in the future (expiration date). Fair value is the theoretical assumption of where a futures contract should be priced given such things as the current index level, index dividends, days to expiration and interest rates. The actual futures price will not necessarily trade at the theoretical price, as short-term supply and demand will cause price to fluctuate around fair value. The value of a futures contract is different from the future price. It is the value of the long or short position in the futures contract itself and it depends on whether the spot price of the underlying asset at the time of valuation is higher or lower than the agreed futures price and the risk-free interest rate. The prices calculated above are the theoretical value of these contracts. Sometime, due to imbalances in supply or demand, the actual prices can be out of line with what we would expect. Over time, they should balance out as arbitragers get paid to take on the risks of executing the portfolio trades as described above. Generally, the price of a futures contract is related to its underlying asset by the spot-futures parity theorem, which states that the futures price must be related to the spot price by the following formula: Futures Price = Spot Price × (1 + Risk-Free Interest Rate – Income Yield)

The theoretical spot price is published in five-minute intervals on the TOCOM Covers Asia, Europe and U.S. trading, Gold Rolling Spot Futures contract is  19 Jan 2019 Here, Rs 6 is the theoretical or fair cost of carry. So the futures contract should be trading around this value of Rs 1006. Note: You may refer to  23 Apr 2014 inflation and unexpected changes in commodities, exhibit prices that differ from the theoretical price of its futures contract. Introduction. 13 Apr 2011 Price changes in the futures contract are settled daily. • Hence the spot price forward and futures prices are no longer theoretically identical.