It is 30 Sept, you noticed the following spot market quotations. 3-month KLIBOR = 5.25% 6-month KLIBOR

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It is 30 Sept, you noticed the following spot market quotations.

3-month KLIBOR = 5.25%

6-month KLIBOR = 6.50%

3-month KLIBOR futures = 91.00

(i) Calculate the mispricing.

(ii) Disclose the arbitrage strategy.

(iii) Assuming the 3-month KLIBOR rate on 24 Dec increases by 2% to 7.25%, show the profit/loss you would make per contract.

Related Book For answer-question

Organic Chemistry

ISBN: 978-0981519432

5th edition

Authors: Marc Loudon

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Posted Date: Nov 14, 2022 03:17 AM

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It is 30 Sept, you noticed the following spot market quotations. 3-month KLIBOR = 5.25% 6-month KLIBOR

Question:

Expert Answer:

Answer i The mispricing is 025 ii The arbitrage strategy is to buy the 3month KLIBOR future and sell ... View the full answer

Organic Chemistry

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