You have noticed the following information and would like to take to opportunity to make arbitrage profit by using the 3 month CPO futures CPO spot price RM4550 per ton Risk free interest rate 2 Annual storage cost RM38 per ton Annual dividend yield 4 3 month CPO Futures RM4680 Is arbitrage possibl...

Assumption Risk Free rate of interest is for 3 months Spot Pri ...

You have noticed the following information and would like to take to opportunity to make arbitrage profit

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You have noticed the following information and would like to take to opportunity to make arbitrage profit by using the 3-month CPO futures.

CPO spot price = RM4550 per ton

Risk-free interest rate = 2%

Annual storage cost = RM38 per ton

Annual dividend yield = 4%

3-month CPO Futures = RM4680

Is arbitrage possible? If possible, what is the strategy and outline the strategy that you are going to use. Suppose the price at maturity is RM4800, what is the profit (/loss) you are able to make? (Assume you invest 100 tons & also consider the 3 months storage cost in your calculation).

Posted Date: Oct 07, 2021 08:52 AM

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