Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is...
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Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is just related to the price of the (zero-coupon) T-bill via B0,1 1/(1+ RTB). Verify that if we observe = Rrepo = RTB we also have an arbitrage opportunity. Are any new assumptions required to complete this argument? Now consider another 1-year rate: the rate on one-year T-bills. Call this rate RTB. It is just related to the price of the (zero-coupon) T-bill via B0,1 1/(1+ RTB). Verify that if we observe = Rrepo = RTB we also have an arbitrage opportunity. Are any new assumptions required to complete this argument?
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Answer rating: 100% (QA)
To analyze the arbitrage opportunity involving the repo rate Rrepo and the rate on oneyear Tbills RTB lets consider the following 1 Rrepo The repo rat... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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