Fair price of future

[sachinonline6]

Hi All,

We calculate Fair price of future as follows

= SP * Exp( (day/365) * (Ri/100) )

SP - Spot price
Ri - Rate of interest
day - no of days to expire..

I would like to know. what is the value of rate of interest.
Is it decided by broker or exchange??
If its decided by broker what is it for indiabulls/reliance??

Thanks
Sachin

 

[thimma]

None of this formula works when you observe the quotes of stock futures here.

Hi All,

We calculate Fair price of future as follows

= SP * Exp( (day/365) * (Ri/100) )

SP - Spot price
Ri - Rate of interest
day - no of days to expire..

I would like to know. what is the value of rate of interest.
Is it decided by broker or exchange??
If its decided by broker what is it for indiabulls/reliance??

Thanks
Sachin

 

[sk.ibulls]

rate of interest should be calculated on the basis of Risk free rate of interest.
i.e if u r investing x amount outside(govt bonds,FD,etc.,)
normally peoples will calculate treasury bond rate (MIBOR rates)
if any one finds wrong.send me an mess.

Regards

$k