Hello David,
difference between future price and expected future spot price is that for the latter we do not take not acount systematic risk of the asset ? In this case, is relation for Fo=E(ST) exp(k) with k=Risk free+Beta*(Excess risk premium relative to market) ?
If we talk about investment asset (not a consumption asset), there is no convenienve yield. So, could we use previous relation to infer "implied Beta" (which is price by the market)? Imagine we know risk free rate; storage cost; and eventually dividend yield. By observing Fo and reverse equation, we can determine Beta (a little bit like convenience yiel is used as a "plug in parameter" to respect cash and carry model) ? Put another way, is it only a ex post relation or can we use it as an ex ante relation ?
In this case, when we observe Fo > (or <) of So*exp(cost of carry), explanation is systematic risk. In this case, could we always talk about arbitrage and strategy that arbitrager set to gain b/c it is fully explain by systematic risk ?
Thank you for your help.
Hervé
difference between future price and expected future spot price is that for the latter we do not take not acount systematic risk of the asset ? In this case, is relation for Fo=E(ST) exp(k) with k=Risk free+Beta*(Excess risk premium relative to market) ?
If we talk about investment asset (not a consumption asset), there is no convenienve yield. So, could we use previous relation to infer "implied Beta" (which is price by the market)? Imagine we know risk free rate; storage cost; and eventually dividend yield. By observing Fo and reverse equation, we can determine Beta (a little bit like convenience yiel is used as a "plug in parameter" to respect cash and carry model) ? Put another way, is it only a ex post relation or can we use it as an ex ante relation ?
In this case, when we observe Fo > (or <) of So*exp(cost of carry), explanation is systematic risk. In this case, could we always talk about arbitrage and strategy that arbitrager set to gain b/c it is fully explain by systematic risk ?
Thank you for your help.
Hervé