|Spot futures parity theorem|
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Definition of Spot futures parity theorem
Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices.
Related:Market conversion price
An analysis wherein the alternatives under consideration will provide the firm
The most distant months of a futures contract. A bond that sells at a discount and does not
The firm's choice of investments is separate from its owner's attitudes towards
A term used to designate all contracts covering the sale of financial instruments or physical
A firm or person engaged in soliciting or accepting and handling orders for
Agreement to buy or sell a set number of shares of a specific stock in a designated future
A constant, set by an exchange, which when multiplied by the futures price gives
A market in which contracts for future delivery of a commodity or a security are bought or sold.
An option on a futures contract. Related: options on physicals.
The price at which the parties to a futures contract agree to transact on the settlement date.
Interest rate differential between two countries is equal to the difference
A London exchange where Eurodollar futures
London exchange where Eurodollar futures as well as futures-style options are traded.
Most distant futures contract
When several futures contracts are considered, the contract settling last.
Mutual fund theorem
A result associated with the CAPM, asserting that investors will choose to invest their
National Futures Association (NFA)
The futures industry self regulatory organization established in 1982.
Nearby futures contract
When several futures contracts are considered, the contract with the closest
Next futures contract
The contract settling immediately after the nearby futures contract.
Portfolio separation theorem
An investor's choice of a risky investment portfolio is separate from his
Purchasing power parity
The notion that the ratio between domestic and foreign price levels should equal
Put-call parity relationship
The relationship between the price of a put and the price of a call on the same
Relative purchasing power parity (RPPP)
Idea that the rate of change in the price level of commodities in
The value of an investment to an individual is not dependent on consumption
Spot exchange rates
Exchange rate on currency for immediate delivery. Related: forward exchange rate.
Spot interest rate
Interest rate fixed today on a loan that is made today. Related: forward interest rates.
The origination of mortgages by processing applications taken directly from prospective borrowers.
Related: cash markets
The nearest delivery month on a futures contract.
The current marketprice of the actual physical commodity. Also called cash price.
The theoretical yield on a zero-coupon Treasury security.
Spot rate curve
The graphical depiction of the relationship between the spot rates and maturity.
The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.
Theoretical futures price
Also called the fair price, the equilibrium futures price.
Theoretical spot rate curve
A curve derived from theoretical considerations as applied to the yields of
Two-fund separation theorem
The theoretical result that all investors will hold a combination of the riskfree
Spot curve, spot yield curve
See Zero curve.
The current interest rate appropriate for discounting a cash flow of
Exchange-traded promise to buy or sell an asset in the future at a prespecified price.
interest rate parity
Theory that forward premium equals interest rate differential.
purchasing power parity (PPP)
Theory that the cost of living in different countries is equal, and exchange rates adjust to offset inflation differentials across countries.
spot rate of exchange
Exchange rate for an immediate transaction.
A contract in which the seller agrees to provide something to a buyer at a specified future date at an agreed price.
Interest Rate Parity
Theory that real interest rates are approximately the same across countries except for a risk premium.
Purchasing Power Parity
Theory that says that over the long run exchange rate changes offset any difference between foreign and domestic inflation. This result assumes that the real exchange rate remains constant, something that is not true even in the long run.
For immediate payment and delivery, as opposed to future payment and delivery.
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