Consider the data given in Problem 12.11 for futures contracts on SINDY index. Suppose you have to
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Consider the data given in Problem 12.11 for futures contracts on SINDY index. Suppose you have to pay transaction costs: (1) When you go long or sell short a portfolio of stocks, transactions costs (brokerage fees plus the price impact of the trade) equal 10 basis points of the synthetic index’s price. (2) There is a one- time fee of $15 for trading forward contracts but no charges for trading bonds. If the forward price is F = $10,231, show how you can make arbitrage profits or explain why you cannot.
PortfolioA portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
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The arbitrage strategy is the same as that in the previous table with addi...View the full answer
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Related Book For 
An Introduction to Derivative Securities Financial Markets and Risk Management
ISBN: 978-0393913071
1st edition
Authors: Robert A. Jarrow, Arkadev Chatterjee
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