hassan

janardhanc Wrote:
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> All the loss or gain on stock must only accumulate
> to Long because short is in arbitrage free
> position. However, dividend payout changes will
> effect short because FV of assumed continuous
> dividend cash inflows are removed when pricing
> forward. If suddenly firm decides to pay no
> dividends, its a cash loss to short or suddenly
> firm pays extra dividends its a cash gain to
> short.
>
> Yes if the stock price goes up and you value the
> forward Long may profit. But next day if the stock
> price goes down Long may loose. However higher
> dividends paid out to short mean while is a real
> additional cash flow.


Did anybody understand that?