no-arbitrage futures price range-R38 example

Wendy01

Why are we all of a sudden dealing with ranges? Why aren't we dealing with no arbitrage prices? Please provide a NUMERICAL example

oneboy

SkipE99 Wrote:
-------------------------------------------------------
> sheeeiiii,,,,,sure doesnt feel like it.

I don't think it is possible to feel ready Skip.

There is too much ambiguity and contradiction in the curriculum and also the test is kind of a lottery.

You are ready and you will pass.



Edited 1 time(s). Last edit at Monday, May 30, 2011 at 05:34PM by Paraguay.

bpdulog

sorry, i am coming upt with the range again...
it is not so straightforward to me but i want to understand it.

the upper range is higher and does not include the convenience yield.
the lower yield includes the convenience yield is therefore lower.

does this mean that the parties that derive a value from the convenice yield are willing to have a lower future price?

mik82

the EOC questions seem relatively straightforward for this reading - agree with SkipE99, just memorize this formula along with lease rate and you will be tip-top.

lcw77

skipE, youre gonna murder this test son, I feel it.

lcai

just memorize it. they will ask you whether the upper range contains the convenience yield or the lower range or what not.

Unforseen

Man, this is the essence of the whole chapter!!!