P1 only.
Today a great question was asked by sammyjny on our youtube channel:
The question is posted at this video, about two hours ago (not that you want or need to view the video. Yikes, I recorded this five years ago!):
So (my paraphrase of) the question is:
How is F(0) <> E[S(t)] compatible with a no-arbitrage assumption;
does not no-arbitrage insist that forward price F(0) = E[S(t)]?
Today a great question was asked by sammyjny on our youtube channel:
I can't understand why is there a difference between futures price and expected spot price in future. From arbitrage theory of pricing forwards/futures, shouldn't the future price be exactly equal to the expected spot price in future? Then what is causing the difference?
The question is posted at this video, about two hours ago (not that you want or need to view the video. Yikes, I recorded this five years ago!):
So (my paraphrase of) the question is:
How is F(0) <> E[S(t)] compatible with a no-arbitrage assumption;
does not no-arbitrage insist that forward price F(0) = E[S(t)]?