Question
Current price of XYZ mining company stock is AUD 60. The term structure of interest rate (continuously compounded) is 10% p.a. (i) What is the
Current price of XYZ mining company stock is AUD 60. The term structure of interest rate (continuously compounded) is 10% p.a.
(i) What is the six-month forward price (F) of the stock?
(ii) If the six-month call price at strike F is equal to AUD 8 and the six-month put price at strike F is equal to AUD 7, explain why there is an arbitrage opportunity with these prices. Demonstrate the arbitrage scenario.
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i The sixmonth forward price F of the stock is calculated as F S er 60 e 60 105 63 ii There is an a...
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Applied Regression Analysis And Other Multivariable Methods
Authors: David G. Kleinbaum, Lawrence L. Kupper, Azhar Nizam, Eli S. Rosenberg
5th Edition
1285051084, 978-1285963754, 128596375X, 978-1285051086
