Question 651 future
Which of the following statements about futures is NOT correct?
(a) Futures quotes displayed on the exchange change continuously.
(b) Futures prices written in existing futures contracts are fixed, they do not change since they’re written in the legal contract.
(c) One year futures quotes equal the market’s expectation of the underlying asset price in one year. For this reason futures markets are a good predictor of the underlying asset prices.
(d) Futures prices can be calculated based on the spot price of the underlying asset compounded forward at the total opportunity cost of capital, less any storage costs and plus any income yields such as dividends.
(e) The futures price quote and the underlying asset's spot price will converge over time. At the future's expiry they’ll be equal.
Copyright © 2014 Keith Woodward