FINS3635 Week 2-3 - pricing futures(3)

FINS3635 Week 2-3 - pricing futures(3) - Textbook Reference...

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1 Textbook Reference This lecture: Chapter 5 – Pricing forwards and futures Next lecture: Chapter 3 – Hedging using futures Week 2 - Pricing forwards & futures FINS3635 Options, Futures and Risk Management Techniques 1 Lecture outline Determination of forward prices: no arbitrage argument Forward prices for investment assets with known income/yield Forward prices on currencies Week 2 - Pricing forwards & futures FINS3635 Options, Futures and Risk Management Techniques 2 Forward prices on commodities Value of forward contract vs. forward price Equivalent of forward and futures prices Assumptions No transaction costs Same tax rate on all net trading profits Borrowing rate is the same as lending rate (i.e., rate-free rate of interest Taking advantage of arbitrage opportunity as they occur Week 2 - Pricing forwards & futures FINS3635 Options, Futures and Risk Management Techniques 3
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