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18 October, 01:02

The two-month interest rates in Switzerland and the United States are, respectively, 0.5% and 2.5% per annum with continuous compounding. The spot price of the Swiss franc is $1.01. The futures price for a contract deliverable in two months is also $1.01. What arbitrage opportunities does this create

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  1. 18 October, 01:21
    0
    1.01337228

    Explanation:

    The theoretical futures price is

    1.01 e^ (0.025-0.005) x2/12

    = 1.01337228
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