Basics of Derivative Pricing and Valuation

Question 1

The value of a forward contract at expiration is_________.

Answer 1

the value of the asset minus the

forward price

Question 2

The value of a forward contract prior to expiration is the value of the asset
minus ________.

Answer 2

the present value of the forward price

Question 3

Futures prices can differ from forward prices because of

________.

Answer 3

the effect of interest interim cash flows from the daily settlement

Question 4

put–call–forward parity

Answer 4

the put price + the value of a risk- free bond with face value equal to the forward price = the call price +the value of a risk- free bond with face value equal to the exercise price