I have a future quoted in the market. Let's say $50 price.

The price model of this future is :

S * Exp (rate + storage - convenience - yield)

How can I be sure that the model gives exactly the same price as the market ($50) and there is no arbitrage ?

Thank you in advance.



How do you calculate storage and convenience ? Do you have your own assumptions ?

If you don't, storage and convenience (like repo) are non-observable parameters which are plugs that make market price = model price, they are implied from the market price of the future. Thus by construction your model price should be equal to the market price.

If you have your own assumptions, then market price and model price could differ, and there would be an arbitrage opportunity.


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