In what world is futures price of the variable a martingale

Assignment Help Business Law and Ethics

Reference no: EM131240977

Consider a variable that is not an interest rate:
(a) In what world is the futures price of the variable a martingale?

(b) In what world is the forward price of the variable a martingale?

(c) Defining variables as necessary, derive an expression for the difference between the drift of the futures price and the drift of the forward price in the traditional riskneutral world.

(d) Show that your result is consistent with the points made in Section 5.8 about the circumstances when the futures price is above the forward price.

Reference no: EM131240977

Questions Cloud

Process followed by f in the traditional risk neutral world : What is the forward price F of f for a contract maturing at time T? - What is the process followed by F in a world that is forward risk neutral with respect to P(t , T)?

Demonstrate an understanding of statistical analysis : Discuss the problems of getting survey data in the real world, also discuss ethics you need to consider when gathering survey data. Also give an example of a real world product and give suitable survey questions.

Strong bond between metals and thermoplastics : Pantheleon Ad produces a hot melt adhesive that provides a strong bond between metals and thermoplastics used for weather stripping, seals, gaskets, hand grips for tools, appliances, etc. ACA claims that by eliminating a primer coat, manufacturers ca..

Significant increase in oil prices in an economy : Suppose that there is a? temporary, but significant increase in oil prices in an economy with an? upward-sloping SRAS curve. As a policy response to this? short-lived but sudden increase in oil? prices, a central bank

In what world is futures price of the variable a martingale : In what world is the futures price of the variable a martingale? - In what world is the forward price of the variable a martingale?

What changes will need to be made in staffing : All are convicted felons and their projected average length of institutional incarceration is approximately 37 months. As the Programs Director your goal is to identify which traditional correctional programs should be replicated in the new instit..

Journalize the adjusting closing and reversing entries : Journalize the adjusting entries. Journalize the closing entries. Journalize the reversing entries. Journalize in quality format the necessary adjusting entries for Bailey Tool Company on page 46.

Find the magnitude of the charge q : The balls are then each given an identical amount of charge q, and each string makes an angle of 30 deg with the vertical as shown in Figure below. Find the magnitude of the charge q.

What payment would this lead to under the cap : The principal amount is $20 million. On a reset date, 3-month LIBOR is 12% per annum. What payment would this lead to under the cap? When would the payment be made?

User Account

All Pages