Consider a contract to purchase an underlying asset, S, at a future time, T, for a fixed price X, which is not the prevailing fair forward price. Let the current price of the underlying be S0, the future price be ST , and denote the discount factor prevailing between 0 and T as d(0, T ). (a) If there are no forward contracts on the underlying available to trade, use an arbitrage or repli- cation argument to derive the current price of this contract (at inception) in terms of S0, d(0,T) and X. (Please note that the final answer is only worth 1 mark, whereas the derivation is worth 3.) (b) If there are forward contracts on the underlying available to trade (both long and short and with maturity T), with fair forward price F, use an arbitrage or replication argument to derive the current price of the contract (at inception) in terms of F, X and d(0,T).