Consider Example 6.1. Suppose the February forward price had been $2.80. What would the arbitrage be? Suppose
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Consider Example 6.1. Suppose the February forward price had been $2.80. What would the arbitrage be? Suppose it had been $2.65. What would the arbitrage be? In each case, identify the transactions and resulting cash flows in both November and February. What are you assuming about the convenience yield? Discuss.
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If the February corn forward price is 280 the observed forward price is too expensive relative to ou...View the full answer
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