The sensitivity of the market price of a financial futures contract depends partly upon the duration of the security to be delivered under the futures contract.

Question

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The duration of the security to be delivered under the futures contract is an important factor that influences the market price of a financial futures contract. The longer the duration of the security, the more sensitive the market price of the futures contract will be to changes in interest rates, inflation, and other economic factors. This is because longer-term securities are more exposed to changes in the economy, and therefore more volatile than shorter-term securities.

The Sensitivity of the Market Price of a Financial Futures