The arbitrage strategy required to exploit the mispricing in future market. Supposing that S&P futures price for delivery in 1 year is 2,050, current value is 2,000, T-bill rate is 4%. Introduction: Arbitrage: Arbitrage can be termed as that transaction done through which there is a chance of two assets producing the same results but may sell at different prices. Arbitrage is important due to the fact the when there is a huge purchase of assets which are cheaper, its price will increase. On the other hand, when an asset is sold at a high price, its price will decrease.

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Chapter 22, Problem 16PS

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To compute: The arbitrage strategy required to exploit the mispricing in future market. Supposing that S&P futures price for delivery in 1 year is 2,050, current value is 2,000, T-bill rate is 4%.

Introduction:

Arbitrage: Arbitrage can be termed as that transaction done through which there is a chance of two assets producing the same results but may sell at different prices. Arbitrage is important due to the fact the when there is a huge purchase of assets which are cheaper, its price will increase. On the other hand, when an asset is sold at a high price, its price will decrease.

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