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Describe the profit from the investor portfolio

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Reference no: EM133034357

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Q1) Critically explain why an arbitrage opportunity exists when the spot price during delivery period is smaller than the futures price of a commodity. Explain whether there will be arbitrage when the spot price is greater than the futures price?

Q2) On June 2, 2018 an investor simultaneously took long positions in a forward contact and a European put option both on the same underlying asset. The maturity of the options contract is the same as that of the forward contract. Describe the profit from the investor's portfolio if the forward price is equal to the strike price.

Reference no: EM133034357

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