Level 121
Level 123

#### 14 words 0 ignored

Ready to learn
Ready to review

## Ignore words

Check the boxes below to ignore/unignore words, then click save at the bottom. Ignored words will never appear in any learning session.

**Ignore?**

continous compounding future value interest factor

FV = PV x e^rt. What formula is this

PVIF. CC

PV = FV x e^rt

Cost of carry model

we Ignore margin cash flows and price futures contract as If forward contract

short selling restrictions impede Reverse cash and carry arbitrage

When will cost of carry model not hold for futures contracts

F = Se^rt

proportional storage costs

consumption commodities

Futures contracts on storable consumption commodities with a convenience yield

F = (S - I)eRT

What is the formula for futures contracts on stocks and bonds

F = Se(r-q)T

What is the formula for futures contracts on asset with continous yields. dividend and foreign currency.

Time 0

Could also ask, show how stock index arbitrage ensures COC relation holds

if F > Se(r-rf)T

Explain how Covered interest arbitrage ensures that IRPT holds

If the underlying asset cannot be stored (electricity)

What is the formula for futures contracts on non storable commodities

Valuing forward contracts, use time 0 and any time before maturity

at time 0, a forward contract has a value of 0.

consider two portfolios

Prove the forward valuing contracts formula, f = (F - K) e -^ RT

They are equal.

Talk about the relationship of futures price to forward price when interest rates are constant