$\begin{array}{|c|c|c|}
\hline \text { Day } & \begin{array}{c}
\text { BHP price } \
\text { (end of day) }
\end{array} & \begin{array}{c}
\text { ANZ price } \
\text { (end of day) }
\end{array} \
\hline \text { Monday } & \$ 18.20 & \$ 24.50 \
\hline \text { Tuesday } & \$ 19.00 & \$ 24.80 \
\hline \text { Wednesday } & \$ 17.80 & \$ 25.90 \
\hline \text { Thursday } & \$ 16.55 & \$ 26.00 \
\hline
\end{array}$
-Consider the end of day prices for ANZ and BHP for Monday through Thursday.Suppose an investor short sells BHP over this period,calculate their continuously compounded return to the investor.

Question

Quizplus · Accepted Answer

Short selling amounts to borrowing the share and then repaying the share at a later date.In this case,the investor will effectively borrow (and sell)the share at the Monday price of $18.20 and then purchase the share at the Thursday price of $16.55.Hence,the continuously compounded return to the investor is ln(18.20/16.55)= 0.095 or 9.5%.

-Consider the End of Day Prices for ANZ and BHP