• 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.|
"Green" Banking: Saving the Environment as You Save and Borrow Money: You're probably already recycling paper, glass and plastic. But did you know you also may be able to help save the environment as you do your banking? Here are options that may be available from your bank. More...
We are at our very best, and we are happiest, when we are fully engaged in work we enjoy on the journey toward the goal we’ve established for ourselves. It gives meaning to our time off and comfort to our sleep. It makes everything else in life so wonderful, so worthwhile. - Earl Nightingale