Verify that vknbspt t equals the payout of a forward, Financial Management

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Verify that vknbspt t equals the payout of a forward

Forwards and carry

(a) Use arbitrage arguments involving two forward contracts with maturity T to prove that

(b) Verify that V_K (T, T) equals the payout of a forward contract with delivery price K. For an asset that pays no income, substitute the expression for its forward price into the above equation and give an intuitive explanation for the resulting expression.

(c) Suppose at time t0 you go short a forward contract with maturity T (and with delivery price equal to the forward price). At time t, t₀.

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Financial Management: Verify that vknbspt t equals the payout of a forward

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Financial Management: Verify that vknbspt t equals the payout of a forward

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