Commodity futures pricing
A)must be related to spot prices.
B)includes cost of carry.
C)converges to spot prices at maturity.
D)all of the above are true.
E)none of the above are true.

Question

Quizplus · Accepted Answer

Commodity futures pricing must be related to spot prices, as the current market price of the underlying commodity is a key determinant of the futures price. The pricing also includes cost of carry, which takes into account the financing costs, storage costs, and other expenses associated with holding the underlying commodity until the futures contract matures. Additionally, the futures price converges to spot prices at maturity, as the futures contract settles based on the spot price of the underlying commodity at that time.

Commodity Futures Pricing