The “Displaystyle r” is the risk-free return constantly compounded, and T is the time until maturity. The intuition behind this result is that, since you want to own the asset at the time T, there should be no difference in a perfect capital market between buying the asset today and keeping it and buying the futures contract and taking over the delivery. Therefore, both approaches must cost the same cost in terms of present value. For proof of arbitration, why this is the case, see the price rationality below. Allaz and Vila (1993) point out that there is also a strategic reason (in an imperfect competitive environment) for the existence of futures trade, i.e. that futures trade can also be used in a world without uncertainty. This is because Stackelberg companies are encouraged to anticipate their production through futures contracts. Another risk arising from the non-standardized nature of futures contracts is that they are settled only on the billing date and do not comply with the future e.H. market. What happens if the forward interest rate indicated in the contract deviates sharply from the spot rate at the time of the count? The value of the futures contract is based on the value of the product traded in the contract.
If the value of a commodity falls at the time of purchase, it becomes more valuable to the seller and if the price increases, then it becomes advantageous for the buyer who will have the right to buy the merchandise at a price that has been stored below the market price. Futures and futures contracts are often confused, but they are very different from each other. Unlike the future contract, the futures contract is a private contract and does not have a standard format. Terms and conditions vary from contract to contract. It has a greater risk factor than the future contract. Unlike standard futures, a futures contract can be adjusted for a product, amount and delivery date. The raw materials traded can be cereals, precious metals, natural gas, oil or even poultry. Futures contracts can be settled on a cash or delivery basis. Suppose f V T (X) FV_ is the time value of X cash flow for the contract period T-Displaystyle T . The futures price is then indicated by the formula: for liquid assets (“marketable”), cash parity is the link between the spot market and the futures market.
It describes the relationship between the spot price and the futures price of the underlying in a futures contract. While the overall effect can be described as the cost of the port, this effect can be subdivided into several components, especially if the asset is active: compared to its future counterparties, forwards (particularly growth rate agreements) need convex adjustments, i.e. a drift concept that takes into account future price changes. For futures, this risk remains constant, while the risk of a futures contract changes if prices change.  If these price conditions do not exist, there is a possibility of arbitrage for a risk-free benefit similar to the one described above. One consequence is that the existence of a futures market will require spot prices to reflect current expectations for future prices. As a result, the futures price of commodities, securities or non-perishable currencies is no longer a predictor of the future price than the spot price – the ratio of futures to spot prices is fuelled by interest rates. For perishable commodities, arbitrage does not involve both futures and futures contracts to buy or sell a product at a set price in the future. But there are slight differences between the two.
While a futures contract is not traded at one exchange, it makes a futures contract. The futures contract is counted at the end of the contract, while the p-l futures contract is billed daily. The most important thing is that futures contracts are standardized contracts that are not adjusted between counterparties. Advance contracts can be used to block a certain price in order to avoid volatility VolatilityVolatility is a measure of the rate of fluctuations in the price of a titr