Consider an asset with a price of R190. A new forward contract on the asset expires in
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Question:
Consider an asset with a price of R190. A new forward contract on the asset expires
in six months with a risk-free rate of 5.4% (discreet compounding). Three months
after you entered into the contract, the price increased to R205 while the riskfree
interest rate remained the same. Calculate the credit risk if you have a long
position and indicate whether you or the counterparty bears this risk. (3)
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