Forward Price Formula
If the underlying asset is tradeable, the forward price is given by:
where
- F is the forward price to be paid at time T
- ex is the exponential function (used for calculating compounding interests)
- r is the risk-free interest rate
- q is the cost-of-carry
- is the spot price of the asset (i.e. what it would sell for at time 0)
- is a dividend which is guaranteed to be paid at time where
Read more about this topic: Forward Price
Famous quotes containing the words price and/or formula:
“Mother goddesses are just as silly a notion as father gods. If a revival of the myths of these cults gives woman emotional satisfaction, it does so at the price of obscuring the real conditions of life. This is why they were invented in the first place.”
—Angela Carter (1940–1992)
“But suppose, asks the student of the professor, we follow all your structural rules for writing, what about that “something else” that brings the book alive? What is the formula for that? The formula for that is not included in the curriculum.”
—Fannie Hurst (1889–1968)