Unformatted text preview: the futures and always be making money. F-± S + ± 2 ² e ξ T > . case 2: F < F * Cashﬂow ( t = 0) Cashﬂow ( t = T ) Buy Futures Contract f S T-F Lend spot at lending rate-F e-θ T F Sell underlying asset at spot S-± 2 f S T Net Cash Flow ± S-± 2 ²-F e-θ T Arbitrage exists when F < ± S-± 2 ² e θ T . The net cash ﬂow is always positive. ± S-± 2 ² e θ T-F > 0, so shorting the asset and long position the futures....
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- Spring '10
- Net Cash, net cash flow, spot Net Cash