I think there’s an error on a derivatives question regarding the correlation between futures and forwards and the implied pricing aspects:
" If we had entered into (an equity index) forward contract…, the (forward) contract price would most likely have been lower but we would have increased the credit risk exposure of our portfolio’.
My reasoning is that since the correlation between equities and rates is positive, then futures must trade richer than forwards. Therefore, I agree with the above statement.
However, Schweser comments: "Generally, equity prices are negatively correlated with interest rates and thus, future prices must be lower than forward prices’. I mean, markets have been quite volatile lately and decorrelations aren’t really there but under ‘normal’ situations equities trade negatively to bond prices and hence positively to rates…