The current spot price of platinum is $2000 per ounce. The one year continuously compounded risk-free...
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The current spot price of platinum is $2000 per ounce. The one year continuously compounded risk-free rate of interest is 5%. (a) Find the one year forward price of platinum per ounce, assuming the price is consistent with the existence of no arbitrage opportunities. (b) Suppose that someone is willing to enter into a long one year forward contract for platinum at $2150 per ounce. Construct a strategy from which an investor can obtain a riskless profit. (c) Suppose that an investor takes a long one year forward position in one ounce of platinum in which the forward (delivery) price is based on no arbitrage. Six months later the price of platinum is still $2000. Find the value of the long position of the contract at that time (6 months after the contract was entered), assuming that the risk-free rate of interest is still 5% (as a continuously compounded annual rate). The current spot price of platinum is $2000 per ounce. The one year continuously compounded risk-free rate of interest is 5%. (a) Find the one year forward price of platinum per ounce, assuming the price is consistent with the existence of no arbitrage opportunities. (b) Suppose that someone is willing to enter into a long one year forward contract for platinum at $2150 per ounce. Construct a strategy from which an investor can obtain a riskless profit. (c) Suppose that an investor takes a long one year forward position in one ounce of platinum in which the forward (delivery) price is based on no arbitrage. Six months later the price of platinum is still $2000. Find the value of the long position of the contract at that time (6 months after the contract was entered), assuming that the risk-free rate of interest is still 5% (as a continuously compounded annual rate).
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a The one year forward price F of platinum per ounce is given by F S x erT where S spot price 2000 r ... View the full answer
Related Book For
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
Posted Date:
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