dennis_cmpe
New Member
My co-worker and I we're having discussions about calculating the market value of a future.
We determined that the market value of a future was actually just the current variation margin of the futures contract (e.g. If money is owed - margin call is required).
So I got confused...in FRM last year we talked about calculating the price of a future (cost of carry-model, F=Se^rt, etc.).
These questions came up:
1) How come the futures price formula does not represent the market value?
2) Why is there a distinction between price and market value?
We determined that the market value of a future was actually just the current variation margin of the futures contract (e.g. If money is owed - margin call is required).
So I got confused...in FRM last year we talked about calculating the price of a future (cost of carry-model, F=Se^rt, etc.).
These questions came up:
1) How come the futures price formula does not represent the market value?
2) Why is there a distinction between price and market value?