You are designing a cash-settled "average price forward contact based on an equity index. The settlement date of the forward contract is 10 business days from today (the trade date). Here's what we mean by a cash-settled "average price forward contract: On the settlement date the counter-parties will exchange the difference between the average of the index price (over the 10 business days) and the contract price. [a] Show that the fair contract price -- the contract price so that no cash flow is exchanged on trade date -- is given by FP= 10 T-i where the F-are the forward prices for the index for the delivery dates matching the 10 business days between trade date and settlement date. i [b] Can you justify this fact via a cash-and-carryo-arbitrage argument? You are designing a cash-settled "average price forward contact based on an equity index. The settlement date of the forward contract is 10 business days from today (the trade date). Here's what we mean by a cash-settled "average price forward contract: On the settlement date the counter-parties will exchange the difference between the average of the index price (over the 10 business days) and the contract price. [a] Show that the fair contract price -- the contract price so that no cash flow is exchanged on trade date -- is given by FP= 10 T-i where the F-are the forward prices for the index for the delivery dates matching the 10 business days between trade date and settlement date. i [b] Can you justify this fact via a cash-and-carryo-arbitrage argument