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What is the no-arbitrage forward price for delivery

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Reference no: EM133206001

Suppose you are a market-maker in SUC index forward contracts. The SUC index spot price is 1100, the risk-free rate is 5%, and the dividend yield on the index is 0.

(i) What is the no-arbitrage forward price for delivery in 9 months?

(ii) Suppose a customer wishes to enter a long index futures position. If you take the opposite position, demonstrate how you would hedge your resulting short position using the index and borrowing or lending.

Reference no: EM133206001

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