Editing Futures contract (section)

===Pricing via expectation===
When the deliverable commodity is not in plentiful supply (or when it does not yet exist) rational pricing cannot be applied, as the arbitrage mechanism is not applicable. Here the price of the futures is determined by today's [[supply and demand]] for the underlying asset in the future.

In an efficient market, supply and demand would be expected to balance out at a futures price that represents the present value of an [[Expected value#Uses and applications|unbiased expectation]] of the price of the asset at the delivery date. This relationship can be represented as<ref>{{cite book|title=Options, Futures, and Other Derivatives|page=125|publisher=Pearson|last1=Hull|first1=John C.|edition=9th|year=2015}}</ref>::

:<math>F(t) = E_t\left\{S(T)\right\}e^{(r)(T-t)} </math>

By contrast, in a shallow and illiquid market, or in a market in which large quantities of the deliverable asset have been deliberately withheld from market participants (an illegal action known as [[cornering the market]]), the market clearing price for the futures may still represent the balance between supply and demand but the relationship between this price and the expected future price of the asset can break down.