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Spot–future parity (or spot-futures parity) is a parity condition whereby, if an asset can be purchased today and held until the exercise of a futures contract, the value of the future should equal the current spot price adjusted for the cost of money, dividends, "convenience yield" and any carrying costs (such as storage).
Put–call parity is a static replication, and thus requires minimal assumptions, of a forward contract.In the absence of traded forward contracts, the forward contract can be replaced (indeed, itself replicated) by the ability to buy the underlying asset and finance this by borrowing for fixed term (e.g., borrowing bonds), or conversely to borrow and sell (short) the underlying asset and loan ...
Spot futures parity: The current price of a stock equals the current price of a futures contract discounted by the time remaining until settlement: S = F e − r T {\displaystyle S=Fe^{-rT}} Put call parity : A long European call c together with a short European put p at the same strike price K is equivalent to borrowing K e − r T ...
This makes put-call parity an essential concept in options trading. One of the most important principles in options trading is known as put-call parity. The term describes a functional equivalence ...
Modigliani–Miller theorem; Monopoly price; Multi-curve framework; ... Spot–future parity; Staple financing; State price density; State prices; Stochastic discount ...
When both covered and uncovered interest rate parity hold, they expose a relationship suggesting that the forward rate is an unbiased predictor of the future spot rate. This relationship can be employed to test whether uncovered interest rate parity holds, for which economists have found mixed results.
(+) is the expected future spot exchange rate at time t + k k is the number of periods into the future from time t. The empirical rejection of the unbiasedness hypothesis is a well-recognized puzzle among finance researchers. Empirical evidence for cointegration between the forward rate and the future spot rate is mixed.
The market's opinion about what the spot price of an asset will be in the future is the expected future spot price. [1] Hence, a key question is whether or not the current forward price actually predicts the respective spot price in the future.