Question
Continuous time forward pricing where interest is the only carrying cost Given S0 $40 r 5% T 3 months or .25 (3 months / 12
Continuous time forward pricing where interest is the only carrying cost
Given S0 $40
r 5%
T 3 months or .25 (3 months / 12 months)
What is the fair value of the forward contract?
If the quoted forward price is F0,T =$43, explain the trades made today in the three markets required to capture an arbitrage profit on the settlement date, T. How much profit do you make from your trades on the settlement date, T? Explain the trades made today in the three markets to capture an arbitrage profit today. How much profit do you make from your trades today? If the quoted forward price is F0,T =$39, explain the trades made today in the three markets required to capture an arbitrage profit on the settlement date, T. How much profit do you make from your trades on the settlement date, T? Explain the trades made today in the three markets to capture an arbitrage profit today. How much profit do you make from your trades today?
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International Finance Theory And Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J Melitz,
11th Edition
013451954X, 9780134519548
