Mathematics

Brooklynn Rose

10 May, 03:17

You read in the paper that the 24-month forward is actually $0.0088/U. Explain in detail how to exploit the mispricing using only the following instruments: buying or selling US or Japanese 2-year zero-coupon bonds, and buying or selling the yen forward. Ignore transaction costs. If you could borrow only up to the equivalent of $1 million, how much money would you make