NISM Certifications · NISM-Series-VIII: Equity Derivatives · Introduction to Forwards and Futures
The difference between the spot price and the futures price of an asset is known as:
The difference between the spot price and the futures price is called the basis. It narrows as expiry nears and becomes zero at expiry, when futures and spot prices converge.
- AOpen interest
- BBasisCorrect
- CContango premium rate
- DSettlement price
Explanation
Basis is defined as spot price minus futures price. It converges to zero as the contract approaches expiry. Open interest is the number of outstanding contracts and settlement price is the price used for MTM.
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