A B C D E F G H

1 SPOT-FUTURES PARITY (COST OF CARRY) Basics

2
3 Inputs Maturity
4 Calendar Time (months) 1 2 3 4 5 6 7
5 Observed Spot Price 1,417.8 1,436.3 1,426.6 1,456.8 1,455.5 1,460.2 1,476.6
6 Observed Futures Price 1,452.7 1,467.9 1,451.4 1,472.8 1,466.7 1,467.1 1,476.6
7 Risk-free rate / month 0.42% 0.42% 0.42% 0.42% 0.42% 0.42% 0.42%
8
9 Outputs
10 Basis (Futures - Spot)
11 Time to Maturity (months)
12 Model Futures Price
13 Price Difference (model-observed)
14
15
16
17
18
19
20
21
F u t u re s a n d S p o t P r ic e s

22
23
24
25
26
27
28
29
30
31 1480
Futures and Spot Prices
32 1470 Model Futures Price
33 1460
Observed Futures Price
34 1450
1440
1430
1420
Observed Spot Price
1410
1400
1390
 F u t u re s
1480
Futures and Spot Prices
1470 Model Futures Price

1460
Observed Futures Price
A
1450 B C D E F G H
35 1440
36 1430
37 1420
Observed Spot Price
38 1410
39 1400
40 1390
41 1380
1 2 3 4 5 6 7
42
43 Calendar Time (months)
44
45
46 SPOT-FUTURES PARITY (COST OF CARRY) Index Arbitrage
47
48 Inputs Maturity
49 Calendar Time (months) 1 2 3 4 5 6 7
50 Transaction Costs (upper bound) 1.6 1.6 1.6 1.6 1.6 1.6 1.6
51 Transaction Costs (lower bound) (1.6) (1.6) (1.6) (1.6) (1.6) (1.6) (1.6)
52
P r i c e D i ff . & T r a n s . C o s t s

53 Outputs
54 Price Difference (model-observed)
55
56
57
58
59
60
61
62
3
Price Difference and Transaction Costs
Arbitrage
A
2 Opportunity
r
b
T
1 r
i
t
a
0 n
r
P a
s
-1 a
r g
i T e
c r
-2 c
t a
e O
i n
-3 p
o s
D p
1 n
i 2 3 a 4 o 5 6 7
f c r
C
f
Calendar
t Time (months)
t
o i
e u
s o
r n
t n
e i
n t
( C
c y
U o
e
p s
p t
e
r (
L
B o
o w
u e
n r
d
) B
o
u
n