Show that equation (5.3) is true by considering an investmen
Question and Solution
Show that equation (5.3) is true by considering an investment in the asset combined with a short position in a futures c
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Show that equation (5.3) is true by considering an investment in the asset combined with a short position in a futures contract. Assume that all income from the asset is reinvested in the asset. Use an argument similar to that in footnotes 2 and 4 of this chapter and explain in detail what an arbitrageur would do if equation (5.3) did not hold.
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