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Spot–future parity is a parity condition whereby, if an asset can be purchased today and held until the exercise of a futures contract, the value of the future should equal the current spot price adjusted for the cost of money, dividends, "convenience yield" and any carrying costs. That is, if a person can purchase a good for price S and conclude a contract to sell it one month later at a price of F, the price difference should be no greater than the cost of using money less any expenses from holding the asset; if the difference is greater, the person has an opportunity to buy and sell the "spots" and "futures" for a risk-free profit, i.e. an arbitrage. Spot–future parity is an application of the law of one price; see also Rational pricing and #Futures.
The spot-future parity condition does not say that prices must be equal , but rather that when the condition is not met, it should be possible to sell one and purchase the other for a risk-free profit. In highly liquid and developed markets, actual prices on the spot and futures markets may effectively fulfill the condition. When the condition is consistently not met for a given asset, the implication is that some condition of the market prevents effective arbitration; possible reasons include high transaction costs, regulations and legal restrictions, low liquidity, or poor enforceability of legal contracts.
Spot–future parity can be used for virtually any asset where a future may be purchased, but is particularly common in currency markets, commodities, stock futures markets, and bond markets. It is also essential to price determination in swap markets.