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Spot–future parity. 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).
Money portal. v. t. e. In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset transacted is usually a commodity or financial instrument.
A market-clearing price is the price of a good or service at which the quantity supplied equals the quantity demanded, also called the equilibrium price. The theory claims that markets tend to move toward this price. Supply is fixed for a one-time sale of goods, so the market-clearing price is simply the maximum price at which all items can be ...
The forward price of such a contract is commonly contrasted with the spot price, which is the price at which the asset changes hands on the spot date. The difference between the spot and the forward price is the forward premium or forward discount, generally considered in the form of a profit , or loss, by the purchasing party.
Price discovery process involves buyers and sellers arriving at a transaction price for a specific item at a given time. It involves the following: [1] Risk management choices. "Market" is a broad term that covers buyers, sellers and even sentiment. A single market will have one or more execution venues, which describes where trades are ...
Normal backwardation, also sometimes called backwardation, is the market condition where the price of a commodity's forward or futures contract is trading below the expected spot price at contract maturity. [1] The resulting futures or forward curve would typically be downward sloping (i.e. "inverted"), since contracts for further dates would ...
Price discrimination. Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different market segments. [1] [2] [3] Price discrimination is distinguished from product differentiation by the more substantial difference in production cost ...
Wholesale price increases fell in May, the latest sign that inflation pressures in the United States may be easing as the Federal Reserve considers a timetable for cutting interest rates. The ...