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Consider that on 31/12/2019 the company OldSystems also has the following bonds outstanding (5 different types of bonds: AXY, Z and W), all with the
Consider that on 31/12/2019 the company OldSystems also has the following bonds outstanding (5 different types of bonds: AXY, Z and W), all with the same type of risk and there are no accrued interests: Bond X Bond Y Bond Z Bond W Time left to maturity (years) 1 2 3 4 Face Value 100 8100 8100 8100 Coupon rate 0.00% 0.00% 5.00% 0.00% Price 98.0392 95.1814 105.7509 87.1442 Compute the arbitrage gain atto from an arbitrage strategy on which you sell short 47x20 units of Bond Y (for example 5x20 -100, which implies that you sell short 100 units of bond Y) Note: there are only accepted strategies that generate a payoff oft and a payoff for 0. Consider that on 31/12/2019 the company OldSystems also has the following bonds outstanding (5 different types of bonds: AXY, Z and W), all with the same type of risk and there are no accrued interests: Bond X Bond Y Bond Z Bond W Time left to maturity (years) 1 2 3 4 Face Value 100 8100 8100 8100 Coupon rate 0.00% 0.00% 5.00% 0.00% Price 98.0392 95.1814 105.7509 87.1442 Compute the arbitrage gain atto from an arbitrage strategy on which you sell short 47x20 units of Bond Y (for example 5x20 -100, which implies that you sell short 100 units of bond Y) Note: there are only accepted strategies that generate a payoff oft and a payoff for 0
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