Consider a variable that is not an interest rate (a) In what world is the futures price
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Consider a variable that is not an interest rate
(a) In what world is the futures price of the variable a martingale
(b) In what world is the forward price of the variable a martingale
(c) Defining variables as necessary derive an expression for the difference between the drift of the futures price and the drift of the forward price in the traditional risk-neutral world
(d) Show that your result is consistent with the points made in Section 5.8 about the circumstances when the futures price is above the forward price.
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a The futures price is a martingale in the traditional riskneutral world b The forward price for a c...View the full answer
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