Given that futures contracts are standardized modifications on forward contracts, the same pricing formula and arbitrage relationship applied.

Futures Price: f

_{0}(T) = [S_{0}– PV(CF)](1+r)^{T}Futures Price (alternative formula): f_{0}(T) = S_{0}(1+r)^{T} – FV(CF)

A lower case “f” notation distinguishes futures from forwards (“F”).

- At the expiration of a futures contract, the futures contract price must equal the spot price of the underlying; if this is not the case then an arbitrage opportunity exists.
- If the futures contract is less than the spot price of the underlying at expiration, then a trader can buy the future and sell the spot.
- If the futures contract is greater than the spot price of the underlying at expiration, then a trader can buy the spot and sell the futures contract.

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