x = Days to the expiration of the futures contract Dividends = Amount of dividends until contract expiration expressed in terms of points on the S&P contract. Also read:What is materiality accounting & 5 practical examples Fair value vs historical cost Historical cost is the actual price at whic...
What is Futures Fair Value?In the case of futures on equity indexes such as the S&P 500 contract, it is possible to make a careful computation of how much a futures contract should cost (in theory) based on the current market prices of the stocks in the index, current interest rates, ...
Fair value can be considered as the equilibrium price for a futures contract in the futures market—that is, the point when supply and demand are equal. This is the spot price adjusted for compounding interest (as well as dividends missed since the investor holds the futures contract rather th...
Similarly, the fair price in the futures market is the equilibrium price for a futures contract. The equilibrium price is when the supply and demand are equal. It is similar to the spot price after including thecompound interest. Even though the price of a security on an exchange seems to ...
A computer implemented method and system for determining fair-value prices of a futures contract of index i having foreign constituent securities includes using a computer to receive electronic data for the index i. A computer can be used to calculate alpha (α) and beta (β) coefficients using...
So, determining the Fair value relationship between the S&P 500 futures contract and the underlying S&P 500 cash index requires adding the cost of borrowing the money to buy the S&P stocks while subtracting the gain those stocks pay in dividends. They rarely match up. ...
A computer implemented method and system for determining fair-value prices of a futures contract of index i having foreign constituent securities includes using a computer to receive electronic data for the index i. A computer can be used to calculate alpha (α) and beta (β) coefficients using...
The five terms of fair value, sell active, sell threshold, buy threshold, and buy active refer to specific values of the arithmetic difference of an index futures contract price minus its spot (or current) price. For example, if the S&P 500 futures contract price is 1409 and the S&P 500...
Fair Value of Stock Index Futures Fair Value=Cash×(1+r×(x360))−Dividendswhere:Cash=Current value of securityr=Interest rate charged by brokerx=Number of days remaining in contractDividends=Number of dividends investor wouldreceive before expiration dateFair Value=Cash×(1+r×(360x))...
Fair value can show the difference between the futures price and what it would cost to own all stocks in that index. For example, the formula for the fair value on the S&P futures contract is: FairValue=Cash×{1+r(x/360)}−Dividendswhere:Cash=CurrentS&PCashValuer=Currentinterestratep...