I know think this was discussed before, but i wasn’t able to find it…

Futures and Forwards Prices technically differ based upon: the correlation between i-rates and the mark-to-market cash flows of futures. Positive r: => Buy futures; Futures > Forwards zero r: => No preference; Futures = Forwards Negative r: => Buy forwards; Futures < Forwards What does this all mean? WHY buy forwards vs. futures if there is a negative correlation?

The true reason behind this pricing difference is not part of the curriculum. All you need to know is that Futures will have more value if they are positively related to the underlying than the Forward and vice versa.

good to know…thanks so much!

the difference can be explained to marking to market. if asset price has positive correlation to interest rates you can reinvest at a higher rate as you make money -> futures are more attractive -> futures prices are higher than forwards

that makes sense maratikus…good explanation!

I liked how Schweser called this ‘an interesting discussion for the second weekend in June’