Equity Forward Contracts
An equity forward contract is an agreement between two parties to buy a pre-specified number of an equity stock (or stock index) at a given price at a given date.
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Notation
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F(0,T) = forward price for a contract initiated at time 0 and expiring in time T
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S0 = spot price of the underlying equity at time 0
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r = risk-free rate (rc indicates continuous compounding)
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δ = dividend yield (δc indicates continuous compounding)
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T = total time of the contract, where T of 1 year = 1 and T of six months = 0.5
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