Ultimate access to all questions.
Explanation:
Yes. Even when the underlying asset and contract terms are identical, futures and forwards can differ in price when interest rates are stochastic.
Why:
Storage cost affects the general cost of carry for both contracts, so it does not by itself create a theoretical futures-forward difference.
Correct answer: D
No comments yet.
Question-144.2 Futures margin requirements
Assume a long position in a gold futures contract has the same terms as a long position in a gold forward contract, e.g., asset quality, quantity, size, and delivery exactly the same. Should there be any theoretical difference in the price of the future and forward contract?
A
No, cost of carry is the same
B
No, both lack a convenience yield
C
Yes, if gold has a storage cost
D
Yes, if interest rates vary unpredictably