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What determines the fair price of an index futures product?

April 26, 2017fair Futures index price Product

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What determines the fair price of an index futures product?

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The pricing of index futures depends upon the spot index, the cost of carry, and expected dividends. For simplicity, suppose no dividends are expected, suppose the spot Nifty is at 1000 and suppose the one-month interest rate is 1.5%. Then the fair price of an index futures contract that expires in a month is 1015.