Consumption asset VS investment asset

all commodity assets excluding gold or silver are consumption assets

Short selling

• involves selling securities that are not owned

Assumptions and notation

1. no transaction costs
2. the same tax rate
3. the same risk-free interest rate
4. take the advantage of arbitrage opportunities

• $S_0$: spot price today
• $F_0$: Futures or forward price today
• $T$: Time until delivery date
• $r$: Risk-free interest rate for period $T$, continuous compounding

Pricing forward

• underlying asset:
  1. assets without an income: non-dividend-paying stocks, and zero-coupon bonds
  2. assets with a known cash income: coupon-bearing bonds, and fixed cash dividends stocks
  3. assets with a known dividend yield: currency and stock indices

Pricing forward on assets without an income

TF: 10个10分

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看4.5和4.6 5.9