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
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—Robert Rossen (1908–1966)
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—Pierre Simon De Laplace (1749–1827)