The previous lesson introduced the future as a contract to buy or sell an asset at a fixed price on a fixed date. This lesson answers the question that follows: what should that fixed price be? The answer is not a forecast of where the asset is going. It is an arithmetic identity built from the cost of holding the asset until delivery, and a trading desk checks it in seconds. By the end you can price an index future in your head, read a futures curve, and spot the trade that locks in a future that is too rich or too cheap.
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