RT Journal Article
SR Electronic
T1 Forward Prices and Futures Prices
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 80
OP 86
DO 10.3905/jai.2005.591580
VO 8
IS 2
A1 Emanuele Amerio
YR 2005
UL https://pm-research.com/content/8/2/80.abstract
AB This article provides an overview on the literature (mainly theoretical) about forward prices and futures prices on the same underlying security with the same expiration. The well-known fundamental relationship between the two prices is derived. In particular, forward prices are expressed in terms of futures prices by means of a convexity drift adjustment that takes into account the instantaneous correlation between those futures prices and discount bonds, driven by two imperfectly correlated Brownian motions. The derivation of the drift adjustment is original.