Discrete vs continuos compounding Equity forwards - Derivatives

Hi all,

If the spot price of an equity is 50 and the discrete rate is 4.5%. Then lets say we weant to know the value if we switch discrete to continuos compounding div yield of 3.5%. What would a 150 day forward be?

I have my notes which say we can apply the following:

Current price x e ^ (Rc-differentialc)T

woud this not be: 50 x e ^(0.045-0.035)x(150/360) = 50.20876

The correct answer is 50.19. How was this calculated?


You have to make the discrete rate to continuous. Apply Ln(1+rate) and do the math

Use 365 days

That helps, cheers Jonta


Sorry getting quite confused on this subject:

If S&P is valued at 1750 and a futures contract expires on the index in 60 days The discrete RFR is 5%. At expiration the value of the dividends on the index is 20. What is the futures price of the contract, given continuing compounding of interest and dividends?

What are the steps in this calculatiion?

Take the price 1750 x e ^ (0.0488 - X???) x 60/365

What is the X in this situation?