Consider the following bid & ask prices for a stock S, a 1yr forward contract F...

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Consider the following bid & ask prices for a stock S, a 1yr forward contract F on the stock, and a 1yr ZCB B (per $1). instrument bid ask 50.38 50.43 51.42 51.48 0.9776 0.9783 stock FWD ZCB Assuming you can trade in fractional units and there are no other transaction costs, create an arbitrage strategy and calculate its cashflows. Consider the following bid & ask prices for a stock S, a 1yr forward contract F on the stock, and a 1yr ZCB B (per $1). instrument bid ask 50.38 50.43 51.42 51.48 0.9776 0.9783 stock FWD ZCB Assuming you can trade in fractional units and there are no other transaction costs, create an arbitrage strategy and calculate its cashflows.

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To create an arbitrage strategy we are looking for opportunities where we can buy and sell financial ... View the full answer