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Assume that a bank can borrow or lend money at the same interest rate in the LIBOR market. The 90-day rate is 2% per annum,
Assume that a bank can borrow or lend money at the same interest rate in the LIBOR market. The 90-day rate is 2% per annum, and the 180-day rate is 2.2% per annum, both expressed with continuous compounding and actual/actual day count. The Eurodollar futures price for a contract maturing in 91 days is quoted as 97.95. What arbitrage opportunities are open to the bank?
Assume that a bank can borrow or lend money at the same interest rate in the LIBOR market. The 90-day rate is 2% per annum, and the 180-day rate is 2.2% per annum, both expressed with continuous compounding and actual/actual day count. The Eurodollar futures price for a contract maturing in 91 days is quoted as 97.95. What arbitrage opportunities are open to the bank?
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