22-30 The sensitivity of the price of a futures contract depends on the duration of the deliverable asset underlying the contract.

Question

Quizplus · Accepted Answer

The sensitivity of the price of a futures contract is affected by a number of factors, one of which is the duration of the deliverable asset. Generally, the longer the duration of the asset, the greater the sensitivity of the futures contract price to changes in interest rates, inflation expectations, and other macroeconomic factors. This is because longer-dated assets are subject to a greater degree of uncertainty and risk, making them more volatile and prone to price fluctuations. Therefore, traders and investors need to take into account the duration of the underlying asset when analyzing and trading futures contracts.

22-30 the Sensitivity of the Price of a Futures Contract