What should a trader do when the one-year forward
price of an asset is too high? Assume that the asset provides no income.

Question

Answer

The trader should borrow the price of the asset,
buy one unit of the asset and enter into a long forward contract to buy the
asset in one year.

Answer

The trader should short the asset, invest the
proceeds of the short sale at the risk-free rate, enter into a long forward
contract to buy the asset in one year

Answer

The trader should short the asset, invest the
proceeds of the short sale at the risk-free rate, enter into a short forward
contract to sell the asset in one year

Answer

The trader should borrow the price of the asset, buy one unit of the
asset and enter into a short forward contract to sell the asset in one year.

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What should a trader do when the one-year forward price of an asset is too high?...

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