Convergence

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Convergence

The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is usually higher because of time value. But as the contract nears expiration, and time value decreases, the futures price and the cash price converge. More generally, convergence trading involves taking two related assets that have different prices with the expectation that prices will converge (the cheaper asset is purchased and the more expensive is sold short).
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Convergence

The fact that the futures price and the spot price for a given asset approach one another as a futures contract on that asset approaches maturity. At maturity, the two prices should be equal. The existence of convergence is the basis for the theory that forward rates equal future spot rates, though this idea is more controversial.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

convergence

The process by which the futures price and the cash price of an underlying asset approach one another as delivery date nears. The futures and cash prices should be equal on the delivery date.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
In this article, we first estimate the national convergence by calculating the sigma value of 7 health indicators.
Results of the sigma convergence analysis are mixed.
The tested sigma value for physicians per thousand people fell from 1982 to 2010, confirming the trend of convergence of this indicator.
For beds per thousand people, no convergence is observed in the 1980s.
Conditional convergence (H2): House price convergence is associated with regional structures.
Unconditional convergence (H3): House price convergence is not associated with regional structures or initial price.
Three different assumptions for convergence were widely investigated by studies on economic growth, which include unconditional convergence, conditional convergence and club convergence.
THEORETICAL MODELS FOR THE THREE CONVERGENCE HYPOTHESES
Additionally, it is not clear how EU experts established the critical values for the nominal convergence criteria: 1.5% percentage points for inflation, +/-15% margin for exchange rate volatility, 60% for public debt, 3% for deficit and 2% percentage points for long-term interest rates.
Thus, we can state that almost all 'nominal' convergence criteria are highly dependent on central bank intervention.
This external disequilibrium will be translated in that non-Euro country, and could influence almost all nominal convergence criteria.
The first conclusion is that 'nominal' convergence is arbitrarily defined in EU Treaties, and includes a number of indicators that are highly dependent on central bank intervention (such as inflation or long-term interest rate).

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