
Financial Risk Manager Part 1
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- Consider an equity index futures contract maturing in 15 months, currently priced at USD 3,759.52. The underlying equity index has a present value of USD 3,625. The equity index is expected to yield a continuous dividend at an annual rate of 2%. Additionally, the continuously compounded risk-free interest rate is set at 5% per year. Assuming no transaction costs, identify an appropriate strategy to exploit any arbitrage opportunities.
- Consider an equity index futures contract maturing in 15 months, currently priced at USD 3,759.52. The underlying equity index has a present value of USD 3,625. The equity index is expected to yield a continuous dividend at an annual rate of 2%. Additionally, the continuously compounded risk-free interest rate is set at 5% per year. Assuming no transaction costs, identify an appropriate strategy to exploit any arbitrage opportunities.
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