Futures pricing - risk premium

Morning,

They say that - “Notice how the risk premium on the asset does not directly appear in the pricing relationship. It does appear implicitly, because it determines the spot price paid to buy the asset. Knowing the spot price, however, eliminates the necessity of determining the risk premium. The derivatives market can simply let the spot market derive the risk premium.” with the formula below:

F 0( T ) = S0(1 + r)T

however - in reality/current market, 1yr forwards/futures move around day to day despite the spot market and interest rates not moving. what accounts for this move in the forward price?

Many thanks

T gets smaller daily.

thanks - im just a little confused that; for example, say there is a view that stocks will stop paying dividends due to a poor economic climate because of covid, wouldn’t index futures prices reflect this risk (reduce the benefits thus increase cost of carry)?

but i suppose this risk may be reflected in each of the underlying stocks and thus not necessary to include in the futures price as highlighted in the notes.

cheers mate your help is always greatly appreciated.

Yes: as the value of the index changes (for whatever reason), futures prices will adjust accordingly, and the value of existing futures positions will adjust as well.