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Question 2 (30 marks) Explain the concept of covered interest arbitrage (CIA) and spot-future arbitrage (SFA) and possible scenarios of CIA and SFA. What theories

Question 2 (30 marks)

  1. Explain the concept of covered interest arbitrage (CIA) and spot-future arbitrage (SFA) and possible scenarios of CIA and SFA. What theories are related to CIA and SFA? Show with appropriate example.

(10 marks)

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