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Table 12.1: Cash Flows to a Cash and Carry Trading Strategy

Table 12.1: Cash Flows to a Cash and Carry Trading Strategy. 1.054597. .985301. 1. 1. 1.037958. 1/2. .967826. 1.016031. .984222. 1.054597. 1. 1/2. 1/2. .981381. 1.02. 1. 1. .947497. .965127. 1.059125. 1.017606. .982699. 1. .982456. 1. 1.037958. 1. 1/2. 1/2. 1/2.

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Table 12.1: Cash Flows to a Cash and Carry Trading Strategy

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  1. Table 12.1: Cash Flows to a Cash and Carry Trading Strategy

  2. 1.054597 .985301 1 1 1.037958 1/2 .967826 1.016031 .984222 1.054597 1 1/2 1/2 .981381 1.02 1 1 .947497 .965127 1.059125 1.017606 .982699 1 .982456 1 1.037958 1 1/2 1/2 1/2 .960529 1 1.020393 B(0) .980015 1.059125 1 P(0,4) .923845 1/2 .977778 P(0,3) 1 .942322 1 = r(0) = 1.02 P(0,2) .961169 P(0,1) .980392 1.062869 P(0,0) 1 .983134 1.042854 1/2 1 1 .962414 1/2 1.019193 .981169 1.02 1/2 1.062869 1 1/2 .937148 .978637 1 .957211 1 1.022406 .978085 1 1.068337 .979870 1.042854 1 1/2 1/2 1 .953877 .976147 1.024436 1 1/2 1.068337 .974502 1 1 time 0 1 2 3 4 Figure 12.1: An Example of a One-Factor Bond Price Curve Evolution. The Money Market Account Values and Spot Rates are Included on the Tree. Pseudo-Probabilities Are Along Each Branch of the Tree.

  3. Figure 12.2: An Example of a Forward Contract Initiated at Time 0 on a 3-Period Zero-Coupon Bond. The forward contract expires at time 2, with value (v(t;st)) and forward price (F(t,2:3;st)). time 0 1 2

  4. Figure 12.3: An Example of a Forward Contract Initiated Time 0 on a Four-Period Zero-Coupon Bond. The forward contract expires at time 3, with value (v(t;st)) and forward price (F(t,3:4;st)).

  5. 1.054597 .985301 1 1 1.037958 1/2 .967826 1.016031 .984222 1.054597 1 1/2 1/2 .981381 1.02 1 1 .947497 .965127 1.059125 1.017606 .982699 1 .982456 1 1.037958 1 1/2 1/2 1/2 .960529 1 1.020393 B(0) .980015 1.059125 1 P(0,4) .923845 1/2 .977778 P(0,3) 1 .942322 1 = r(0) = 1.02 P(0,2) .961169 P(0,1) .980392 1.062869 P(0,0) 1 .983134 1.042854 1/2 1 1 .962414 1/2 1.019193 .981169 1.02 1/2 1.062869 1 1/2 .937148 .978637 1 .957211 1 1.022406 .978085 1 1.068337 .979870 1.042854 1 1/2 1/2 1 .953877 .976147 1.024436 1 1/2 1.068337 .974502 1 1 time 0 1 2 3 4 Figure 12.1: An Example of a One-Factor Bond Price Curve Evolution. The Money Market Account Values and Spot Rates are Included on the Tree. Pseudo-Probabilities Are Along Each Branch of the Tree.

  6. time 0 1 2 Figure 12.4: An Example of a Futures Contract with Expiration Date 2 on the 3-Period Zero-Coupon Bond. Futures prices (F(t,2:3)) are given at each node. Pseudo-probabilities are on each branch of the tree. The synthetic futures contract (n0(t;st), n3(t;st)) in the money market account and the 3-period bond are also provided.

  7. time 0 1 2 3 Figure 12.5: An Example of a Futures Contract with Expiration Date 3 on a 4-Period Zero-Coupon Bond. Futures prices (F(t,3:4)) are given at each node. Pseudo-probabilities are along the branches of the tree. The synthetic futures contract (n0(t;st), n4(t;st)) in the money market account and 4-period bond is also provided.

  8. Table 12.2: A Comparison of Forward and Futures Prices for a Two-Period Contract on the Three-Period Zero-Coupon Bond. Spot Prices are also Included.

  9. Table 12.3: A Comparison of Forward and Futures Prices for a Three-Period Contract on the Four-Period Zero-Coupon Bond. Spot Prices are also Included.

  10. 1.054597 .985301 1 1 1.037958 1/2 .967826 1.016031 .984222 1.054597 1 1/2 1/2 .981381 1.02 1 1 .947497 .965127 1.059125 1.017606 .982699 1 .982456 1 1.037958 1 1/2 1/2 1/2 .960529 1 1.020393 B(0) .980015 1.059125 1 P(0,4) .923845 1/2 .977778 P(0,3) 1 .942322 1 = r(0) = 1.02 P(0,2) .961169 P(0,1) .980392 1.062869 P(0,0) 1 .983134 1.042854 1/2 1 1 .962414 1/2 1.019193 .981169 1.02 1/2 1.019193 1 1/2 .937148 .978637 1 .957211 1 1.022406 .978085 1 1.068337 .979870 1.042854 1 1/2 1/2 1 .953877 .976147 1.024436 1 1/2 1.068337 .974502 1 1 time 0 1 2 3 4 Figure 12.1: An Example of a One-Factor Bond Price Curve Evolution. The Money Market Account Values and Spot Rates are Included on the Tree. Pseudo-Probabilities Are Along Each Branch of theTree.

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