What Is a "Stale Price" and How Does It Impede Convergence? ▴ Learn

What Is a “Stale Price” and How Does It Impede Convergence?

A stale price is a price quote for an asset that has not been recently updated and does not reflect the current market value. This can happen in illiquid markets or when a data feed fails.

A stale price impedes convergence because if the futures contract is priced off a stale spot price, the basis will appear artificially stable or unstable, preventing arbitrageurs from acting on the true market price difference to force convergence.

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