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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 ...
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For example, a US investor buying a Standard and Poor's 500 e-mini futures contract on the Chicago Mercantile Exchange could expect the cost of carry to be the prevailing risk-free interest rate (around 5% as of November, 2007) minus the expected dividends that one could earn from buying each of the stocks in the S&P 500 and receiving any ...
Technology stocks weighed on Wall Street on Tuesday, as investors grew cautious ahead of the Federal Reserve's interest rate decision this week following a stronger-than-expected retail sales reading.
The forward curve is a function graph in finance that defines the prices at which a contract for future delivery or payment can be concluded today. For example, a futures contract forward curve is prices being plotted as a function of the amount of time between now and the expiry date of the futures contract (with the spot price being the price at time zero).
Spot price – the price of the asset at the time of the trade. Forward price – the price of the asset for delivery at a future time. Notional – the amount of each currency that the option allows the investor to sell or buy. Ratio of notionals – the strike, not the current spot or forward. Numéraire – the currency in which an asset is ...