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Unformatted text preview: These trading strategies are characterized by the fact that all their cash flows are known - and certain! - and can be predetermined at time 0. Further, you can assume that you trade the instrument whose value you try to determine at time 0. 5. [02/14] Problem (6b) refers to the "price of an instrument." Be careful not to confuse the price of the instrument with a price that could be written *into* the instrument. For example, you must distinguish between the price of a forward contract (same as its value, if there are no arbitrage opportunities) and the forward price written into the contract Sheet1 Page 2 or (b) that the maturity of the contract is 100 days the problem refers to the former, not the latter....
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This note was uploaded on 09/28/2008 for the course NBA 6730 taught by Professor Janosi,tibor during the Spring '06 term at Cornell.
- Spring '06