Unveiling the Mechanics: How Futures and Forwards are Priced
In the world of finance, futures and forwards play a crucial role in managing risk and facilitating price discovery. These derivative contracts allow market participants to hedge against price fluctuations and speculate on future market movements. Understanding how futures and forwards are priced is essential for investors, traders, and financial professionals alike. In this article, we will delve into the intricacies of pricing these contracts, exploring the key factors and methodologies involved.