Arbitrage question
Assume that today is 5/11/2020and thatyou can lend/borrow at interestrates of 1% p/a (monthly compounding)
Below is the table with gold prices for May 2020 and May 2021
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DATA : May 11,2020- closing prices |
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Month |
Price |
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May-20 |
1723 |
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May-21 |
1750 |
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- Find anarbitrage opportunity using the spot and future prices of Gold.
- How would your answer to previous question change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
- How would your answer toquestionQ.1.1 change if you can lend/borrow at interestrates of 2% p/a (monthly compounding)
- (HARD)Assuming that there are no arb. Opportunities, calculate theinterval oflending ratesas implied by the futures prices.
and youhave to pay for borrowingGold a lending fee of2% p/a (monthly compounding).
Remember , youpay a 2% p/a lending fee (monthly compounding) if you borrow Gold.
