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The price of crude oil is currently $ 7 1 . 6 7 per barrel. The forward price for delivery in one year is $
The price of crude oil is currently $ per barrel. The forward price for delivery in one year is $ per barrel. An arbitrageur can borrow money at per annum. There are barrels of oil in each forward contract. Assume that the cost of storing crude oil is $ and crude oil provides no income during this time period. A Is this forward curve in contango or backwardation and explain why? B Could this scenario be profitable? What should the arbitrageur do and why? Show calculations
The price of crude oil is currently $ per barrel. The forward price for delivery in one year is
$ per barrel. An arbitrageur can borrow money at per annum. There are barrels
of oil in each forward contract.
Assume that the cost of storing crude oil is $ and crude oil provides no income during this time
period.
A Is this forward curve in contango or backwardation and explain why?
B Could this scenario be profitable? What should the arbitrageur do and why? Show
calculations
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