Alun Lan
Fin 430
Dr Wang
22nd October 2023
1. I think the role of arbitrage in the future and forward markets is to profit off the
difference between the prices. Arbitrage refers to leveraging differences between assets to
their potential price. I also feel that it is buying on the securities and then selling them on
a different market to also help alleviate some risk as a sort of arbitrage.
2.
Exchange rate G – J .02
4% annual rate euro
1% annual rate yen
Euro – Yen .02
Forward price = .02 * e^ [(.04-.01) *.05]
.02*e^[.015]
Euro/Yen .0203
Yen – Euro 1/.02
Forward price = 50 *(e^[(.01-.04)*.05]
50*e^[-.015]
Yen/Euro 49.26