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Explain the Term “Convergence” in Futures Pricing.

Convergence is the principle that the price of a futures contract and the price of its underlying spot asset must become equal at the contract's expiration date. As the expiration approaches, the difference between the two prices (the basis) narrows until it reaches zero.

This ensures the integrity of the pricing mechanism.

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Explain the Term ‘Convergence’ in the Context of Futures Expiration
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