hw-four.pdf - Anqi Lou(al44684 M339D(unique:53970 Problem 4.1 A Problem 4.2 C Problem 4.3 False Problem 4.4 C Problem 4.5 B Problem 4.6 D Problem 4.7

# hw-four.pdf - Anqi Lou(al44684 M339D(unique:53970 Problem...

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Anqi Lou (al44684) M339D (unique:53970) HW 4 03/02/2018 Problem 4.1 A Problem 4.2 C Problem 4.3 False Problem 4.4 C Problem 4.5 B Problem 4.6 D Problem 4.7 From the given information, we can know: ?(0) = 100, 𝛿 = 0.01, 𝑟 = 0.04, ? = 2, 𝐹 = 110 Since it is a continuous-dividend-paying stock, 𝐹′ 0,2 = 𝐹 0,2 𝑃 × 𝑒 𝑟×2 = ?(0) × 𝑒 −𝛿×2 × 𝑒 𝑟×2 ≅ \$106.18 Since 𝐹 0,2 = 110 and is higher than 𝐹′ 0,2 , an arbitrage opportunity is available. Arbitrage portfolio { long a prepaid forward contract short a forward contract And profit = profit(long ppd forward) + profit(short forward)
• Spring '14
• CUDINA
• Derivative, \$0, \$106.18, \$3.82

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