1. The contract size of one futures contract on the S&P 500 is $250 times the S&P...
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Question:
1. The contract size of one futures contract on the S&P 500 is $250 times the S&P 500 futures price - an increase by 1 index point means a transfer of $250 from the short to the long position. Suppose today the S&P 500 index has reached 1460 index points, the S&P 500 pays a dividend yield of 4.5% per year, the term structure of interest rates is flat and the short rate is constant over time and equals 2% (c.c.).
(a) In absence of arbitrage opportunities, what is today's futures price of the S&P 500 futures with maturity in 50 days?
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