d) Consider the following situations: On 4th March 2022, a trader believes that due to...
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d) Consider the following situations: On 4th March 2022, a trader believes that due to market volatility, there may be an opportunity for arbitrage between the KLIBOR futures market and the physical market. : Current market data are as follows: 3-month KLIBOR : 8% (90 days till 3rd June 2022) 6-month KLIBOR 9% (180 days till 3rd September 2022) In September, September KLIBOR futures converge evith physical rate at 10%. Assume that you can borrow or lend RM1,000,000. i. Based on the closing data as at 4th March 2022 on the the 3-month KLIBOR Futures (June 2022), explain how the trader is able to determine whether an arbitrage exists and suggest the strategy. (8 marks) TOTAL = 38 marks d) Consider the following situations: On 4th March 2022, a trader believes that due to market volatility, there may be an opportunity for arbitrage between the KLIBOR futures market and the physical market. : Current market data are as follows: 3-month KLIBOR : 8% (90 days till 3rd June 2022) 6-month KLIBOR 9% (180 days till 3rd September 2022) In September, September KLIBOR futures converge evith physical rate at 10%. Assume that you can borrow or lend RM1,000,000. i. Based on the closing data as at 4th March 2022 on the the 3-month KLIBOR Futures (June 2022), explain how the trader is able to determine whether an arbitrage exists and suggest the strategy. (8 marks) TOTAL = 38 marks
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