Fair Value Premium of Futures

Exchanges
Slump
July 30, 2022
Banking
Non-Bank
July 30, 2022

The difference between the futures value (the theoretical value of a futures contract) and the spot index value (cash index price) which brings the futures and the equity markets to a state of equilibrium. It is calculated as the interest that could be earned on the index (i.e., cost of carry) minus the underlying stock dividends between today and settlement (expiration) date.

It is simply known as fair value of futures.

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