The S&R index spot price is 1100, the risk-free rate is 5% (continuously compounded), and the dividend

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The S&R index spot price is 1100, the risk-free rate is 5% (continuously compounded), and the

dividend yield on the index is 0.

(a) Suppose you observe a 6-month futures price of 1135. What arbitrage would you

undertake? Please use the table of cash ow to analyze.

(b) Suppose you observe a 6-month futures price of 1115. What arbitrage would you

undertake? Please use the table of cash ow to analyze.

Posted Date: May 19, 2024 11:05 AM

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The S&R index spot price is 1100, the risk-free rate is 5% (continuously compounded), and the dividend

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