Which of the following is true when F_0,T

Question

Which of the following is true when F_0,T < E(S_T)? A) occurs when long hedgers outnumber short hedgers B) occurs when short hedgers outnumber long hedgers C) The market is said to be in contango. D) The market is said to be in normal contango. E) The pure expectations hypothesis holds.

Quizplus · Accepted Answer

When F_0,T < E(S_T), it indicates that the futures price is below the expected future spot price, which typically occurs when short hedgers outnumber long hedgers, leading to a situation known as normal backwardation.

Which of the Following Is True When F0,T < E(ST)

Which of the Following Is True When F_0,T < E(S_T)