Question
You have noticed the following information and would like to take to opportunity to make arbitrage profit by using the 3-month CPO futures. CPO spot
- You have noticed the following information and would like to take to opportunity to make arbitrage profit by using the 3-month CPO futures.
CPO spot price = RM4550 per ton
Risk-free interest rate = 2%
Annual storage cost = RM38 per ton
Annual dividend yield = 4%
3-month CPO Futures = RM4680
Is arbitrage possible? If possible, what is the strategy and outline the strategy that you are going to use. Suppose the price at maturity is RM4800, what is the profit (/loss) you are able to make? (Assume you invest 100 tons & also consider the 3 months storage cost in your calculation).
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Assumption Risk Free rate of interest is for 3 months Spot Pri...
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Econometric Analysis
Authors: William H. Greene
5th Edition
130661899, 978-0130661890
