This paper consolidates the results of some recent work on the relation between forward prices and futures prices. It develops a number of propositions characterizing the two prices. These propositions contain several testable implications about the difference between forward and futures prices. Many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets, even though they are not in themselves asset prices. The paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors.

The term structure of interest rates is an important subject to economists, and has a long history of traditions. This paper re-examines many of these traditional hypotheses while employing recent advances in the theory of valuation and contingent claims. We show how the Expectations Hypothesis and the Preferred Habitat Theory must be reformulated if they are to obtain in a continuous-time, rational-expectations equilibrium. We also modify the linear adaptive interest rate forecasting models, which are common to the macroeconomic literature, so that they will be consistent in the same framework.

The term structure of interest rates is an important subject to economists, and has a long history of traditions. This paper re‐examines many of these traditional hypotheses while employing recent advances in the theory of valuation and contingent claims. We show how the Expectations Hypothesis and the Preferred Habitat Theory must be reformulated if they are to obtain in a continuous‐time, rational‐expectations equilibrium. We also modify the linear adaptive interest rate forecasting models, which are common to the macroeconomic literature, so that they will be consistent in the same framework.