Rolling Over Short-Dated Futures Contracts Is the Same as Taking

question 4

Multiple Choice

Rolling over short-dated futures contracts is the same as taking one long-dated futures contract if

• A) The interest rates are constant.
• B) The average change in the spot price is zero over the life of the contract.
• C) There is daily mark-to-market of both the short-dated and long-dated contracts.
• D) The size (notional value) of the open position in the futures does not change over the horizon of the transactions.

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Definitions:

Debit Entries

Accounting entries that increase an asset or expense account, or decrease a liability or equity account.

Credit Entries

Bookkeeping records that increase liabilities or equity or decrease assets on a company's balance sheet.

Liability Account

A financial accounting account that represents obligations to pay debts or amounts owed to others.

Capital Account

An account showing the net worth of a business entity, including its equity and investments.