define the following, and discuss the difference between them at origination, before expiration, and at expiration. ◦forward price and the value of a forward contract ◦futures price and the value of a futures contract b) discuss the assumptions under which futures and forward prices can be considered the same. c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
define the following, and discuss the difference between them at origination, before expiration, and at expiration. ◦forward price and the value of a forward contract ◦futures price and the value of a futures contract b) discuss the assumptions under which futures and forward prices can be considered the same. c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
ChapterP1: Part 1: Integrative Problem: The International Financial Environment
Section: Chapter Questions
Problem 5Q
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a) define the following, and discuss the difference between them at origination, before expiration, and at expiration.
◦forward price and the value of a forward contract
◦futures price and the value of a futures contract
b) discuss the assumptions under which futures and forward prices can be considered the same.
c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
d) explain and discuss the use of interest rate parity in pricing foreign currency forwards and futures.
e) describe how spot prices are determined using the cost-of-carry model.
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