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Derivatives




Fair Value Premium of Futures


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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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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