Digital stock-arbitrage opportunity


Provide a short justification the following:

The current price of Digital stock is $44 a share. You are offered a forward price for Digital stock to be delivered in one year of $42. The forward price is lower than the spot price because the market anticipates a sharp decline in the price of Digital stock, and the contract offers a way to hedge this risk. There is no arbitrage opportunity.

Solution Preview :

Prepared by a verified Expert
Finance Basics: Digital stock-arbitrage opportunity
Reference No:- TGS01451144

Now Priced at $20 (50% Discount)

Recommended (92%)

Rated (4.4/5)