Question
The arbitrage price for a futures contract and for a call option (whether binomial or Black-Scholes-Merton), demonstrate time decay that is, holding everything else constant,
The arbitrage price for a futures contract and for a call option (whether binomial or Black-Scholes-Merton), demonstrate time decay that is, holding everything else constant, the price declines as one gets close to maturity. Explain why this behavior follows from how the arbitrage portfolio is formed for each type of instrument.
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Foundations Of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
17th Edition
126001391X, 978-1260013917
