Alpha Geek

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    Polytechnic State University Sanluis
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Category > Business & Finance Posted 04 Aug 2017 My Price 6.00

An investment bank engages in stock index arbitrage for its own and customer accounts

 An investment bank engages in stock index arbitrage for its own and customer accounts. On a particular day, the S&P Index at the New York Stock Exchange is 602.25 when the futures contract for delivery in 90 days is 614.75. If the annualized 90-day interest rate is

8.00 percent and the (annualized) dividend yield is 3 percent, would program trading in- volving stock index arbitrage possibly take place? If so, describe the transactions that should be undertaken, and calculate the profit that would be made per each “share” of     the S&P 500 Index used in the  trade.

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Alpha Geek
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Status NEW Posted 04 Aug 2017 12:08 PM My Price 6.00

Cal-----------cul-----------ati-----------on -----------of -----------the-----------ore-----------tic-----------al -----------spo-----------t p-----------ric-----------e f-----------or -----------the----------- in-----------dex-----------: T-----------he -----------the-----------ore-----------tic-----------al -----------spo-----------t p-----------ric-----------e f-----------or -----------the----------- in-----------dex----------- ca-----------n b-----------e c-----------omp-----------ute-----------d a-----------s b-----------elo-----------w: -----------S =----------- F*-----------Exp-----------[-(-----------r-d-----------)t]----------- =$-----------614-----------.75-----------*Ex-----------p[------------(0.-----------08------------0.0-----------3)*-----------0.2-----------5]

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