CHAPTER 1

For example, in such a case, if one agrees to deliver a 90-day Treasury bill 30 days from now, he must, a. Buy a zero coupon bond with 120 days to expiry. b. Short the 90 days futures with 30 days to expiration. This is known as cash and carry arbitrage. It is possible only when, F > S(1+r30/365)30/365. where, F is futures market rate . S is ... ................
................