On August 1, the one-month LIBOR rate is 2.0 percent and the two-month LIBOR rate is 2.5 percent. The 30-day fed funds futures is quoted at 96.75. Assuming no basis risk between fed funds and one-month LIBOR at the start of the delivery month, identify whether an arbitrage opportunity is available. The contract size of the fed funds futures is $5,000,000.

On August 1, the one-month LIBOR rate is 2.0 percent and the two-month LIBOR rate is 2.5 percent. The 30-day fed funds futures is quoted at 96.75. Assuming no basis risk between fed funds and one-month LIBOR at the start of the delivery month, identify whether an arbitrage opportunity is available. The contract size of the fed funds futures is $5,000,000.

Corporate Financial Accounting

15th Edition

ISBN:9781337398169

Author:Carl Warren, Jeff Jones

Publisher:Carl Warren, Jeff Jones

ChapterD: Investments

Section: Chapter Questions

Problem D.10EX: Fair value journal entries, trading investments Jets Bancorp Inc. purchased a portfolio of trading...

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D & R A1 7

Question 7. Fed Funds Futures Arbitrage

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