Return to the arbitrage strategy laid out in Example 22.9. What would be the three steps of
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Return to the arbitrage strategy laid out in Example 22.9. What would be the three steps of the strategy if F0 were too low, say, $3,950? Work out the cash flows of the strategy now and in one year in a table like the one in the example. Confirm that your profits equal the mispricing of the contract.
P-636
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ISE Investments
ISBN: 9781266085963
13th International Edition
Authors: Zvi Bodie, Alex Kane, Alan Marcus
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