Earning the largest possible arbitrage profit


Question: Anyone can borrow or lend cash for 1% a month, compounded monthly. Prices for silver are listed below.

(Today)Day 0 prices

Futures contract (expiring on the 9th of each month)

Cash (March 9)

April 2005

May 2005

June 2005

$7.08/oz

$7.15/oz

$7.22/oz

$7.28/oz


1) This market is not in equilibrium.  How could you earn the largest possible arbitrage profit, assuming that the arbitrate opportunity is going to disappear within a few minutes as other trader catch on?

2) What would be your per oz. profit?

Solution Preview :

Prepared by a verified Expert
Finance Basics: Earning the largest possible arbitrage profit
Reference No:- TGS02062177

Now Priced at $20 (50% Discount)

Recommended (95%)

Rated (4.7/5)