Question
Suppose the s&p 500 index spot price is 2500, the risk-free rate is 5%(annual, continuously compounded), and the dividend yield on the index is 0.
Suppose the s&p 500 index spot price is 2500, the risk-free rate is 5%(annual, continuously compounded), and the dividend yield on the index is 0.
1) Suppose you observe a 6-mont forward price of 2700. What arbitrage would you undertake?
2) suppose you observe a 6-month forward price of 2220. What Arbitrage would you undertake?
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Practical Financial Management
Authors: William R. Lasher
6th Edition
1439080496, 978-1439080498
