define the following, and discuss the difference between them at origination, before expiration, and at expiration. ◦forward price and the value of a forward contract ◦futures price and the value of a futures contract b) discuss the assumptions under which futures and forward prices can be considered the same. c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
define the following, and discuss the difference between them at origination, before expiration, and at expiration. ◦forward price and the value of a forward contract ◦futures price and the value of a futures contract b) discuss the assumptions under which futures and forward prices can be considered the same. c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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a) define the following, and discuss the difference between them at origination, before expiration, and at expiration.
◦forward price and the value of a forward contract
◦futures price and the value of a futures contract
b) discuss the assumptions under which futures and forward prices can be considered the same.
c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices.
d) explain and discuss the use of interest rate parity in pricing foreign currency forwards and futures.
e) describe how spot prices are determined using the cost-of-carry model.
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