Find an arbitrage opportunity

Assignment Help Portfolio Management

Reference no: EM133085007

DERIVATIVE SECURITIES - CASE

Use futures and spot relationship to find an arbitrage opportunity.

F = S*erT

We learned that when future price is deviated from the price determined from the above formula, an arbitrage opportunity will arise. You will use this case to illustrate if you can find an arbitrage opportunity in a real world.

You may define the parameters on your own or use the following assumption for the parameters:
Interest rate is 5%
Transaction costs for a trade on futures (selling or buying) is a flat fee of $25.

You may use 365 days a year to calculate interest.

To find spot gold price, you may google "spot gold price" or use the most nearby month futures price as spot price.

Your case report should include the following format:
• Introduction of the case study.
• Explanation of any related theory,
• Data sources (a screen shot of the Futures quote from CME.com),
• Analytical results
• Conclusion

Assume you have $1,000,000 trading credit to conduct the arbitrage.

Include Excel calculation, in a word document with findings.

Attachment:- DERIVATIVE SECURITIES Case.rar

Reference no: EM133085007

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