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We derived an equation for the price of a futures contract using an arbitrage argument. Its clear that the value of a futures contract should
We derived an equation for the price of a futures contract using an arbitrage argument. Its clear that the value of a futures contract should move when the price of the underlying asset moves (all else equal). Is it possible for the actions of participants in futures markets to cause movements in the value of the underlying? Explain why or why not. Hint: it may be helpful to focus on the kinds of trades that we used in developing the arbitrage argument.
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