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When pricing futures with the cost of carry model; When do you use continuous compounding and when do you just use simple compounding? AND WHY?

Also, when deriving proof of no arbitrage with the cost of carry model, shall we then use continious compounding as the alternative interest rate?

In the latter case i dont understand why, since the risk free rate of i.e 3 month T.bond will not be compounded every day, or continually...

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  • $\begingroup$ My personal opinion: when do I continuous compounding? when the equations and calculus is made easier and its theoretical work. when do I use real compounding? when I'm actually making a financial calculation for myself or a client. $\endgroup$ – Attack68 Jan 23 at 21:27

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