Question
Assuming the futures contract is trading at the no-arbitrage price, for a futures contract on an equity index with a positive dividend yield: I. Backwardation
Assuming the futures contract is trading at the no-arbitrage price, for a futures contract on an equity index with a positive dividend yield:
I. Backwardation will occur if the dividend yield is greater than the risk free rate.
II. Contango will occur if the dividend yield is greater than the risk free rate.
III. Contango will occur if the risk free rate is positive.
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Investment Analysis and Portfolio Management
Authors: Frank K. Reilly, Keith C. Brown
10th Edition
538482109, 1133711774, 538482389, 9780538482103, 9781133711773, 978-0538482387
