Why is marking to market on Future contract not discounted back like Forward contract?
When we mark to market for Forward contract, we would calculate as:
=> (Ft - F0) / (1+Rf)T-t
When marking to market for Future contract, we calculate as:
=> Current future price - Previous settlement price
Therefore, why is marking to market for Future contract not discounted back as Forward contract? What is the difference?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.