• The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge.
• Is the behavior of a cash commodity or the underlying security instrument and the derivative moving towards one another.
| ||Embedded terms in definition|
| ||Cash commodity|
| ||Referenced Terms|
| ||Bond arbitrage hedge funds: Try to capture interest rate differentials or spreads due to mispricing or better financing than general market participants can attain. Sometimes, there can be a yield pickup due to Convergence between two instruments, a pricing discrepancy due to inefficient evaluations of senior and junior credit risks, or relative value differences.|
| ||Hedge properties: Are features considered necessary for a good risk management position. There are four basic properties, and they are: Economic Validity, Reasonable Correlative Movements, Convergence, and Consistent Basis Behavior.|
| ||Narrowing: Is the movement towards Convergence between the cash and futures market or the cash and forwards market. Here, the price or interest rate differentials are becoming smaller over time between the comparative delivery dates.|
Managing Your Expenses on a Fixed or Reduced Income: Once you've retired, you finally have the opportunity to work at your dream job - keeping yourself happy. It's your chance to visit places you've always wanted to see, take up a new hobby and spend more time with your family and friends. But to be successful at this new position, you've got to make the most of your income and investments. Here are suggestions. More...
A hero is no braver than an ordinary man, but he is braver five minutes longer. - Ralph Waldo Emerson