Enter Forward Contract Inputs
Formula Used
Cost of Carry ModelContinuous compounding: F = S × e^((r + c - y) × t)
Simple compounding: F = S × (1 + (r + c - y) × t)
Long forward value: Vlong = (Fmarket - K) × discount factor × contract size
Short forward value: Vshort = -Vlong
Where: S is spot price, F is fair forward price, K is delivery price, r is risk-free rate, c is carry cost, y is income yield, and t is time in years.
This model helps compare a market quote with a theory-based price, then values long and short contracts using the selected discounting convention.
How to Use This Calculator
- Enter the current spot price of the underlying asset.
- Enter the delivery price already agreed in the contract.
- Add the annual risk-free rate, carry cost, and income yield.
- Set the remaining time to maturity in years.
- Enter the contract size to scale values and notionals.
- Provide a quoted forward price to test market mispricing.
- Choose continuous or simple compounding.
- Submit the form and review fair price, basis, valuation, and export options.
Example Data Table
| Scenario | Spot | Delivery | Rate % | Carry % | Yield % | Years | Quoted Forward | Theoretical Forward | Selected Value |
|---|---|---|---|---|---|---|---|---|---|
| Commodity hedge | 100.0000 | 104.0000 | 5.00 | 2.00 | 1.00 | 0.75 | 105.2000 | 104.6028 | 57.7917 |
| Equity index carry | 4,200.0000 | 4,285.0000 | 4.20 | 0.00 | 1.40 | 0.50 | 4,268.0000 | 4,259.2135 | 166.4672 |
| Inventory financing | 80.0000 | 83.5000 | 6.50 | 3.00 | 0.00 | 1.00 | 87.5000 | 87.6000 | 450.7042 |
Frequently Asked Questions
1. What does this calculator estimate?
It estimates the fair forward price, basis, long and short contract values, pricing gaps, implied funding rate, and basic arbitrage interpretation from your assumptions.
2. Why does carry cost matter?
Carry cost raises the fair forward price because holding the asset until delivery can require financing, storage, insurance, or other ownership-related expenses.
3. Why is income yield subtracted?
Income yield lowers the forward price because dividends, coupons, or other benefits received while holding the asset reduce the net cost of carry.
4. What is basis in this context?
Basis is the spot price minus the forward price used for valuation. It helps show whether the forward trades above or below spot.
5. When should I enter a quoted forward price?
Enter a quoted price when you want to compare the market contract against the model value. Leave it blank to value the contract at fair theoretical price.
6. What is the difference between long and short value?
A long gains when the current forward value rises above the delivery price. A short gains when the current forward value falls below it.
7. Does the arbitrage note guarantee profit?
No. It is only a pricing hint. Real trading depends on funding access, transaction costs, taxes, borrow availability, liquidity, and execution timing.
8. Can I export the calculation?
Yes. After calculating, use the CSV button for spreadsheet-friendly output or the PDF button for a compact downloadable summary of results.