Theoretical futures price

Similar financial terms

Theoretical spot rate curve
A curve derived from theoretical considerations as applied to the yields of actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.

Spot futures parity theorem
Describes the theoretically correct relationship between spot and futures prices. Violation of the parity relationship gives rise to arbitrage opportunities.

Next futures contract
The contract settling immediately after the nearby futures contract.

Nearby futures contract
When several futures contracts are considered, the contract with the closest settlement date is called the nearby futures contract. The next futures contract is the one that settles just after the nearby futures contract. The contract farthest away in time from settlement is called the most distant futures contract.

National Futures Association (NFA)
The futures industry self regulatory organization established in 1982.

Most distant futures contract
When several futures contracts are considered, the contract settling last.

London International Financial Futures Exchange
London International Financial Futures Exchange (LIFFE) is a London exchange where Eurodollar futures as well as futures-style options are traded.

The Commodity Futures Trading Commission (CFTC)
The Commodity Futures Trading Commission is the federal agency created by Congress to regulate futures trading. The Commodity Exchange Act of 1974 became effective April 21, 1975. Previously, futures trading had been regulated by the Commodity Exchange Authority of the USDA.

Synthetic Futures
A position created by combining call and put options. A synthetic long futures position is created by combining a long call option and a short put option for the same expiration date and the same strike price. A synthetic short futures is created by combining a long put and a short call with the same expiration date and the same strike price.

Exercise price
Price at which the holder of an option can buy (call option) or sell (put option) the underlying stock. Also referred to as strike price.

Ask price
The price at which a market maker is prepared to sell a security. Also known as offer price.

Offer price
The price at which a market maker is prepared to sell a security. Also known as ask price.

Bid price
The price at which a market maker is prepared to buy a security.

Settlement price
The average of the prices that a futures contract trades for immediately before the bell signaling the close trading for a day. It is used in mark-to-market calculations.

Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.

Transfer price
The price at which one unit of a firm sells goods or services to another unit of the same firm.

Subscription price
Price that the existing shareholders are allowed to pay for a share of stock in a rights issue.

Strike price
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.

Spot price
The current marketprice of the actual physical commodity. Also called cash price.

Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates.

Put price
The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.

Price-volume relationship
A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded.

Price-specie-flow mechanism
Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance.

Prices
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.

Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point.

Priced out
The market has already incorporated information, such as a low dividend, into the price of a stock.

Price takers
Individuals who respond to rates and prices by acting as though they have no influence on them.

Price risk
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of mortgage-pipeline risk created in the production segment when loan terms are set for the borrower in advance of terms being set for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell his originated loans at a discount.

Price elasticity
The percentage change in the quantity divided by the percentage change in the price.

Price discovery process
The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers.

Price compression
The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price.

Price/sales ratio
Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.

Price/earnings ratio
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Option price
Also called the option premium, the price paid by the buyer of the options contract for the right to buy or sell a security at a specified price in the future.

Opening price
The range of prices at which the first bids and offers were made or first transactions were completed.

Nominal price
Price quotations on futures for a period in which no actual trading took place.

Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk.

Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification.

Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.

Market prices
The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.

Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.

Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.

Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio.

Low price
This is the day's lowest price of a security that has changed hands between a buyer and a seller.

Limit price
Maximum price fluctuation

Law of one price
An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.

Bargain-purchase-price option
Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires.

Basis price
Price expressed in terms of yield to maturity or annual rate of return.

Call price
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.

Clean price
Bond price excluding accrued interest.

Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI very month.

Convertible price
The contractually specified price per share at which a convertible security can be converted into shares of common stock.

Daily price limit
The level within many commodity, futures, and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract.

Equilibrium price
The price when the supply of goods matches demand.

Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the Capital Asset Pricing Model (CAPM).

Known price item
When a good whose price is widely known by members of the public is priced to attract customers.

Variable Price Limit
A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.

Commodity Price Index
Index or average, which may be weighted, of selected commodity prices, intended to be representative of the markets in general or a specific subset of commodities (for example, grains or livestock).

Price discrimination
Price discrimination occurs whenever a firm charges differential prices across customers that are not related to differences in production and distribution costs. Thus, discriminating firms seek to exploit the perceived consumer surplus and maximize producer surplus.