标题: question on 1-year gold fwd price [打印本页] 作者: MeteorShower 时间: 2011-7-11 18:30 标题: question on 1-year gold fwd price
Suppose that the 1-year gold lease rate is 1.5% and the 1-year risk-free rate is 5%. Both rates are compounded annually. You entered into a forward contract with a hedger whereby you agree to buy large amounts of gold at fixed price (F). What is the maximaum 1-year gold forward price you should quote to the gold-mining company when the spot price is 600$ ?作者: siavosh 时间: 2011-7-11 18:30
the logic is at time 0, you borrow gold from a central bank at lease rate 1.5% and sell it at current market price (600$). at time in 1-year, you buy gold from the gold mining company at fixed price F and use it to repay the central bank.
Thus th calculation is 600*1.015*1.05 = 639.45.
Does it make sense?
