How Do Derivatives like Futures Contracts Affect the Price Discovery of a Spot Asset? ▴ Learn

How Do Derivatives like Futures Contracts Affect the Price Discovery of a Spot Asset?

Futures contracts, by providing a market for future expectations, allow participants to hedge and speculate on the future price of the spot asset. The continuous trading of futures influences the current spot price by incorporating market sentiment and future supply/demand expectations.

This leads to more efficient price discovery.

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