A riskless stock index arbitrage profit is possible if the following condition holds: F₀,T = S₀(1 + rf - d)ᵀ,where spot price now is S₀,value now of a futures contract expiring at time T is (F₀,T),rf is the risk free rate and d is the dividend.

Question

Quizplus · Accepted Answer

The correct condition for a riskless stock index arbitrage is F₀,T = S₀e^(rf-d)T, where e is the base of the natural logarithm. The given formula is incorrect.

A Riskless Stock Index Arbitrage Profit Is Possible If the Following