The expectations hypothesis of futures pricing
A) is the simplest theory of futures pricing.
B) states that the futures price equals the expected value of the future spot price of the asset.
C) is not a zero-sum game.
D) is the simplest theory of futures pricing and states that the futures price equals the expected value of the future spot price of the asset.
E) is the simplest theory of futures pricing and is not a zero-sum game.

Question

Quizplus · Accepted Answer

The expectations hypothesis of futures pricing indeed combines both the simplicity of the theory (it's considered the simplest theory of futures pricing) and the idea that the futures price is set equal to the expected future spot price of the asset. This hypothesis suggests that the futures market is an unbiased predictor of future spot prices.

The Expectations Hypothesis of Futures Pricing