What Is 'Convergence' in Futures Pricing? ⎊ Path

What Is ‘Convergence’ in Futures Pricing?

Convergence is the principle that the price of a futures contract and the spot price of its underlying asset must become equal at the contract's expiration. This is enforced by arbitrage.

If the futures price were higher than the spot price at expiration, an arbitrageur could profit risk-free by selling the future and buying the spot asset. This activity forces the prices together.

The basis, which is the difference between the two, must converge to zero.

How Does a Perpetual Contract Differ from a Traditional Futures Contract?

How Does the Settlement Method Affect the Final Price Convergence of the Futures Contract?

How Does the Funding Rate Mechanism Replace the Expiration Date of a Traditional Futures Contract?

What Is the Process of ‘Convergence’ and Why Is It Inevitable in Futures Markets?

What Is the Consequence of a Clearing Member Failing to Meet a Default Fund Assessment?

How Does the Expiration Date Affect the Volatility of the Futures Contract?

Define the Term ‘Delivery Date’ in a Physically-Settled Futures Contract

Define the Term ‘Convergence’ in Futures Trading

Glossar

Convergence

Equilibrium ⎊ Convergence, within cryptocurrency, options, and derivatives, signifies a state where market prices across different exchanges or related instruments align, reflecting efficient information dissemination and reduced arbitrage opportunities.