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Having looked at the formula for the convexity adjustment as a function of the covariance between rates accruing till maturity and asset price, I have an intuition that the difference between fair values of a forward and future are simply from reinvesting margin payments.

Since if higher payments (increase in value of the asset, roughly speaking) correlate positively with higher rates (so I can reinvest payments at higher rates), then the future should be more attractive. However I am not sure how to prove this mathematically. If true, can someone provide a proof?

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    $\begingroup$ Proposition 6 in the Cox, Ingersoll, Ross paper here steps through this proof in discrete time and states the associated result for a continuous time economy. Hope this helps. $\endgroup$ – Francis Feb 8 at 21:29

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