In a no-arbitrage framework, the theoretical futures price of a non-dividend-paying asset is primarily determined by _____

In a no-arbitrage framework, the theoretical price of a futures contract is determined by the cost of carry model. For a non-dividend-paying financial asset, the only cost associated with holding the asset instead of the futures contract is the opportunity cost of the capital used to purchase the asset, which is represented by the risk-free interest rate.   If the futures price deviates from the theoretical value, an arbitrageur could make a risk-free profit by buying the cheaper asset and selling the more expensive one (cash-and-carry arbitrage), which would quickly drive the price back to equilibrium.   Note – ·        While the expected future spot price is relevant in the Expectations Hypothesis, the no-arbitrage framework specifically relies on current market variables (spot and interest rates) to prevent risk-free profits, regardless of future expectations. ·        Furthermore, in a theoretical no-arbitrage model, the price is dictated by the underlying spot market and financing costs; supply and demand imbalances in the futures market are corrected by arbitrageurs using the spot market. ·        Volatility is a primary driver for option pricing (e.g., Black-Scholes model) but does not enter the linear no-arbitrage calculation for futures/forwards.