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Convergence

Definition:

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).

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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Baskets of Listed Depositary Receipts

Nasdaq's fund family made of four funds that will track indexes composed of American Depositary Receipts (ADRs) of foreign companies.

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