Answer-first summary for fast verification
Answer: Yes, if interest rates vary unpredictably
Yes. Even when the underlying asset and contract terms are identical, **futures and forwards can differ in price when interest rates are stochastic**. Why: - A **forward** contract is settled only at maturity. - A **futures** contract is marked to market daily. - Because of daily settlement, futures gains/losses are reinvested or financed at prevailing interest rates. - If interest rates are **constant**, futures and forwards have the same value. - If interest rates **vary unpredictably**, their prices may differ. 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**
Author: Manit Arora
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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
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