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L2 52 Futures Markets and Contracts > e describe backwardation and contango; > Flashcards

e describe backwardation and contango; Flashcards

L2 52 Futures Markets and Contracts (8 decks)

a explain why the futures price must converge to the spot price at expiration;

b determine the value of a futures contract;

c explain why forward and futures prices differ;

d describe monetary and nonmonetary benefits and costs associated with holding the underlying asset, and explain how they affect the futures price;

e describe backwardation and contango;

f explain the relation between futures prices and expected spot prices;

g describe the difficulties in pricing Eurodollar futures and creating a pure arbitrage opportunity;

h calculate and interpret the prices of Treasury bond futures, stock index futures, and currency futures.

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