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Consider a 9-month forward contract established at a rate of $28. The contract is 3 months into its life. The spot price is $30, the
Consider a 9-month forward contract established at a rate of $28. The contract is 3 months into its life. The spot price is $30, the annual risk-free rate is 4%, and the underlying makes no cash payments. At month 3, determine:
a) the amount at risk of a credit loss:
b) Which party bears the credit, long or short?
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