Since all transactions take place during the deliver period, the arbitrage prot from this strategy would be
F – S. In the case where the spot price is higher than the futures price, the strategy for the arbitragers will be:
1. Buy a futures contract at price F and take delivery.
2. Sell the asset at spot price F.
is will result in an arbitrage prot of S – F.
PROBLEM5.3
Assume that the futures price of the cashew contract is INR 5,500 and the spot price of cashews is INR 5,400 during
the tender period. e prices are per carton and each futures contract is for 50 cartons.
(i) What transactions would an arb
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