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  3. 2. the 6-month and 9-month libors are 3.5% and 3.7

2. The 6-month and 9-month LIBORs are 3.5% and 3.75% per annum, respectively. Both LIBORs...

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2. The 6-month and 9-month LIBORs are 3.5% and 3.75% per annum, respectively. Both LIBORs are expressed with continuous compounding and Actual/365 day count convention. (a) Calculate the 6-month Eurodollar futures price. Ignore the convexity adjustment. (5 marks) (b) If the 6-month Eurodollar futures price is actually traded at 95 on the market, is there an arbitrage opportunity? If yes, how would you design an arbitrage portfolio? (5 marks) (c) Suppose the 9-month Eurodollar futures price is 95.15. Estimate the 12-month LIBOR. (5 marks) 2. The 6-month and 9-month LIBORs are 3.5% and 3.75% per annum, respectively. Both LIBORs are expressed with continuous compounding and Actual/365 day count convention. (a) Calculate the 6-month Eurodollar futures price. Ignore the convexity adjustment. (5 marks) (b) If the 6-month Eurodollar futures price is actually traded at 95 on the market, is there an arbitrage opportunity? If yes, how would you design an arbitrage portfolio? (5 marks) (c) Suppose the 9-month Eurodollar futures price is 95.15. Estimate the 12-month LIBOR

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