Valuation of Forward and Future Contracts Flashcards by Branden Pham

Q

Reminder: What are derivates?

A

Security comprised of another security

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Q

What is ‘F’?

A

Price of a future contract

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Q

What if F is higher than current price of a good?

A

‘Overpriced’
Allows for arbitrage

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Q

What if F is lower than current price of a good?

A

Underpriced
Allows for Arbitrage

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