Economics, Econometrics and Finance
4 years ago

Unlocking the Secrets of Forward and Futures Contracts: What You Need to Know

WORLD SCIENTIFIC eBooks
FORWARD CONTRACTS AND FUTURES CONTRACTS
Robert A. Jarrow, George S. Oldfield

Paper Summary

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The article discusses the differences and similarities between forward contracts and futures contracts. It explains how simple arbitrage arguments can be used to value forward contracts and how forward prices relate to spot prices and futures prices. The researchers argue that forward prices may not always equal futures prices unless interest rates are deterministic.