673_hw2_faq__updated_02.13_06.30_pm

673_hw2_faq__updated_02.13_06.30_pm - These trading...

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Sheet1 Page 1 FAQ - Homework 2 You will find below a summary of the more interesting questions that were asked in connection with the homework. Depending on the issues that might come up, this list might be updated from time to time. 1. [02/12] Can we assume a 360-day year when computing Japanese discount rates? Yes. 2. [02/12] A typo in the note for problem 4 (b) has been corrected. Changes are highlighted in red. 3. [02/13] In problem 1, one could interpret the phrase "maturing in 100 days' time" in two ways (a) that the maturity of the contract is 100 days from "today" from the day "three months ago," when you entered into the first forward contract. Please choose interpretation (a). 4. [02/14] For problem (6b), you can assume that you are dealing with trading strategies similar to the ones we have seen in class.
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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.

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673_hw2_faq__updated_02.13_06.30_pm - These trading...

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