1. Given the risk-neutral process of a non-tradable market index as, ds, St = y(t)dt + odz where y(t) is a time function and is a constant. Assume also that risk-free interest rate r is constant and flat. (a) Use risk-neutral pricing to determine the futures price Kr of the index with maturity at T. Note: Maturity payoff of a futures contract is defined as F = S - K, where K is the futures delivery price defined at current time. It should be noted that current value of a futures contract is zero for which there is no cost on both sides in entering the agreement.