Timeline for why futures contract has no value
Current License: CC BY-SA 3.0
6 events
| when toggle format | what | by | license | comment | |
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| Mar 14, 2017 at 1:48 | comment | added | A.Oreo | @Quantuple I may get it, but even for the any fixed strike $K$ i.e $V(t,T) = e^{-r(T-t)}E[S_T-K|\mathcal{F}_t],$ the cash flow is still $dF?$ But, It seems $dV \neq dF(S,r,t).$ | |
| Mar 13, 2017 at 15:34 | comment | added | Quantuple | @A. Oreo, please read carefully the answers provided. $F(S,r,t)$ above is the future price. It is given by $F(t,T)=\Bbb{E}^Q[S_T \mid \mathcal{F}_t]$ and is clearly not zero. Yet a futures contract value is indeed zero at the moment at which you enter it $V(S,r,t) = \Bbb{E}^\Bbb{Q} \left[ \sum_{i=1}^N e^{r(t_i-t)} (F(t_i,T)-F(t_{i-1},T)) \right]$. Don't confuse functions $V(...)$ and $F(...)$. A similar reasoning applies to forward contract values vs. prices. | |
| Mar 13, 2017 at 12:51 | answer | added | nbbo2 | timeline score: 2 | |
| Mar 13, 2017 at 11:14 | history | edited | A.Oreo | CC BY-SA 3.0 |
added 88 characters in body
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| Mar 13, 2017 at 11:03 | answer | added | Chris Taylor | timeline score: 1 | |
| Mar 13, 2017 at 10:43 | history | asked | A.Oreo | CC BY-SA 3.0 |