An at-the money call written on a stock with current price St = 100 trades at 3.
Question:
(a) A trader writes a forward contract on the delivery of this stock. The delivery will be within 12 months and the price is Ft. What is the value of Ft?
(b) Suppose the market starts quoting a price Ft = 101 for this contract. Form two arbitrage portfolios.
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a F t S t 1 r T t 105 where T t 1 year b F t 101 Co...View the full answer
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Related Book For 
An Introduction to the Mathematics of financial Derivatives
ISBN: 978-0123846822
2nd Edition
Authors: Salih N. Neftci
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