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Derivatives and Risk Management, 1st Edition
book

Derivatives and Risk Management, 1st Edition

by Sundaram Janakiramanan
May 2024
Intermediate to advanced content levelIntermediate to advanced
542 pages
27h 26m
English
Pearson India
Content preview from Derivatives and Risk Management, 1st Edition
Single Stock Futures and Stock Index Futures 
Price of the June contract
Step 1: e current stock price is INR 235.
Step 2: e number of days from April 18 to the maturity of a June contract (June 24) is 72 days.
Step 3: e company pays dividends of INR 40 on June 3. e number of days from the dividend payment date to
the maturity date is 22.
Step 4: As there are dividends paid, the price will be calculated using F
0
= S
0
× e
rT
– D × e
r(T–t)
.
Step 5: e price of a May contract is F
0
= 235 × e
(0.08×72/365)
– 40 × e
(0.08×22/365)
= INR 198.54.
It can be seen that the futures price of the June contract is lower than the futures contract prices of ...
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Publisher Resources

ISBN: 9781299447547Publisher Website