Question
It is December now. A June futures contract on 10,000 MMBtu of natural gas settled for $3.95 per MMBtu. Assume that the contract has exactly
It is December now. A June futures contract on 10,000 MMBtu of natural gas settled for $3.95 per MMBtu. Assume that the contract has exactly 6 months to maturity. Present value of six-month worth of storage costs is $.05 per MMBtu. The spot price is $3.78. The interest rate is 3% annually.
Design an arbitrage. Show profit per one contract, using continuous compounding for calculations.
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International financial management
Authors: Jeff Madura
13th edition
978-1337099738, 1337099732, 9781337515894, 1337515892, 978-1337587211
