Question
1. The current value of the P&S 347 index is 2300 points while the prices of a P&S futures contract for delivery in six months
1.
The current value of the P&S 347 index is 2300 points while the prices of a P&S futures contract for delivery in six months is $60,000. The risk-free interest rate is 10% per year and the future value of the dividends P&S index is $2500. The contract multiplier is %25, which means that for the purposes of this futures contract each index point is worth that much. No need to compound interest.
- a) What is the value of the arbitrage profit per contract that can be made here?
- b) If the cost of short-selling shares corresponding to one P&S index future is $3000, what is the value of the arbitrage profit per contract?
2.
Two European call options, A and B (with strike prices KA and KB respectively, and premia CA and CB respectively), are written on the same underlying and expire at the same time. If KA 3. The stock of the Triangular File Company is trading at $90 per share. A one-year call option written on Triangular File, with a strike price of $100, is trading at $8. The interest rate is 10% per year.
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