Futures prices and interest rates
If there is a direct relationship with futures prices and interest rates, futures are priced higher than forwards. Isn’t the price of a futures contract set at the beginning of the contract?
Also, I’ve seen explanations of this based on what happens when the underlying moves. So, can someone explain this in terms of the futures price moving (not the underlying). If the reasoning is that as the underlying moves up a long futures contract (at expiration) will be more valuable, it still doesn’t make sense with respect to price.
My confusion is that since the futures price is set at the outset, why is the price sensitive to interest rates?
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