1.

Describe Pricing of Future.

Answer»

The cost of carry model used for pricing futures. The Cost of carry is the cost incurred when you hold a certain investment position. This includes interest costs, margin expenses, financial expenses for advisors, fees etc.

F = Se^rt

where: 

r = Cost of financing (using continuously compounded interest rate) 

T = Time till expiration in years 

e =2.71828



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