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YouTube T3-03: Value of a futures contract

Nicole Seaman

Director of FRM Operations
Staff member
The value of a futures contract is given by [F(0) - K]*exp(-rT). At contract inception, the delivery price is the prevailing forward price; K = F(0). Over time, as the long/short position tends toward maturity, the term of the contract shortens and the F(0) price changes. The delivery price, K, does not change during the life of the contract (the long has promised to pay this price for the commodity, the short has promised to receive this price in exchange for delivery of the commodity).

David's XLS is here: http://trtl.bz/010318-yt-futures-value