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One Use for Futures Markets Is "Price Discovery," That Is

question 9

Essay

One use for futures markets is "price discovery," that is, the future price mirrors the current consensus of the future price. If the current price of corn is $2.00 a bushel and the cost of carry is 7 percent, explain what an investor would do if futures price of wheat were $2.40. Is the investor at risk?


Definitions:

Control Limits

Statistical boundaries in process control that indicate the acceptable range of variation for a process to be considered in control.

R-chart

A type of control chart used in statistical quality control to monitor the range of variability within a sample.

Control Limits

Predetermined boundaries in statistical process control that indicate the limits of variation acceptable for a process to be considered in control.

Control Limits

Statistical boundaries within a control chart that represent acceptable levels of variation in a process.

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