Hello, I have a few questions regarding forward contracts and no-arbitrage pricing. Any guidance and explanation is appreciated. Thank you!

Suppose you have a long position in a stock index and you are planning to liquidate your position exactly one year from now.

• Using the 1-year forward contract, explain how you would hedge your position?

Suppose that you are an arbitrageur and that the market price of the 1-year forward contract is trading $0.25 lower than the calculated fair value of $101.77. Describe a trading strategy that would exploit this mispricing.

An assumption of the risk-neutral and hence, the no-arbitrage pricing is that r (risk-free rate) is constant over time. Suppose after executing your arbitrage strategy the Fed cuts the interest rate by 50 basis points exactly six months after. How does this affect your arbitrage strategy?