From MarketsWiki
Jump to navigation Jump to search

R1 220074 Ad-2-animated.gif

Convergence is the idea that by the close of the contract, the price of a future eventually equates to the cash market. It varies by commodity and geography, but historically the relationship between the cash and futures markets has been fairly constant, with predictable seasonal variation.[1]

Convergence is important as a risk-offset for traditional market hedgers, who take opposite positions in futures from the cash market and use the transactions as collateral for bank lines of credit. [2]