On May 10th, 2021, the gold spot price was $1,580/oz and the 9-month risk-free interest rate was

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On May 10th, 2021, the gold spot price was $1,580/oz and the 9-month risk-free interest rate was 2% (annualized), Assume the cost of storage and insurance of gold is $100/oz payable on February 7th, 2022. Use actual/actual day count method and simple interest method.

a) What is the equilibrium price of gold futures on May 10th, 2021 for delivery in 273 days, February 7th, 2022?

b) If the futures price is $1,800, how can you create an arbitrage profit making strategy? What is the amount of arbitrage profit?

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Derivatives Markets

ISBN: 9789332536746

3rd Edition

Authors: Robert McDonald

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Posted Date: May 04, 2023 12:15 AM

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On May 10th, 2021, the gold spot price was $1,580/oz and the 9-month risk-free interest rate was

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a The equilibrium price of gold futures can be calculated as follows First we need to calculate the ... View the full answer

Derivatives Markets

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