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Suppose the risk - free rate r is constant. By directly computing the expectation in the risk - neutral pricing formula, show that at time
Suppose the riskfree rate r is constant. By directly computing the expectation in the
riskneutral pricing formula, show that at time the value that is the no arbitrage price of a forward
contract on a nondividend paying stock with current price S delivery price K and maturity time T is
given by
f S KerT
You are not allowed to use the no arbitrage arguments in Week Notes, pg Your proof should be a
few lines at most.
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