The situation is similar for futures contracts in which a party opens a futures contract for the purchase or sale of a currency (for example. B of a contract to purchase Canadian dollars) that expires later because it does not wish to be exposed to currency/exchange risk for a certain period of time. Because the exchange rate between the U.S. dollar and the Canadian dollar varies between the trading date and the earlier date of the contract or expiry date, one party and the counterparty lose if one currency strengthens relative to the other. Sometimes the attacker purchase is open because the investor really needs Canadian dollars at some point in the future, such as paying Canadian dollar-denominated debt. Other times, the party that opens an attacker does so not because it needs Canadian dollars or because it secures foreign exchange risks, but because they speculate on the currency and expect the exchange rate to move favourably to generate a profit when the contract is concluded. i – “Display style I” the current value of discrete income at the time t 0 < T-Displaystyle t_{0}<T" and q % p . one. "Display style" q-%p.a.

is the continuous increase in dividend yield over the term of the contract. The intuition is that if an asset pays income, it has an advantage to keep the asset rather than the attacker because you get that income. Therefore, the income (I-Displaystyle I or q “Displaystyle q”) must be subtracted to reflect this benefit. An example of an asset that pays discrete income could be a stock, and an example of an asset that pays a continuous return could be a foreign currency or a stock market index. Note: If you look at the yield convenience page, you will see that, if there are finite assets/inventories, reverse cash and carry arbitrages are not always possible. It would depend on the elasticity of demand for futures and similar contracts. Since the final value (at maturity) of a position in advance depends on the prevailing spot price, this contract can be considered a “bet on the future spot price”[3] Suppose Bob wants to buy a home in a year. At the same time, let`s assume that Andy currently owns a $100,000 house that he wants to sell in a year. Both parties could enter into a futures contract. Suppose the two agree on the sale price in one year of $104,000 (lower why the selling price should be that amount).