Pricing of Futures

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When the deliverable asset exists in plentiful supply, or may be freely created, then the price of a futures contract is determined via arbitrage arguments."

This is typical for stock index futures, treasury bond futures, and futures on physical commodities when they are in supply (e.g. corn after the harvest). However, when the deliverable commodity is not in plentiful supply or when it does not yet exist.

For example on wheat before the harvest or on Eurodollar Futures or Federal funds rate futures (in which the supposed underlying instrument is to be created upon the delivery date).

The futures price cannot be fixed by arbitrage. In this scenario there is only one force setting the price, which is simple supply and demand for the asset in the future, as expressed by supply and demand for the futures contract.