et Ft Ft e

ft Ft e Ft F
short fwd
Long fwd
t I t
agreed agreed
n Pe off T Assume Ft Ft e
Fe St Fe

Fe F

Ft t

E
ga

Intersection S i Ft e ft St
D
Ft Ft s Zsc

T
Payoff a
payoff T n Payoff T

I K

s St S

F St
 Forward spot Pority Formula

F Sci fi
T
E
t i
1 Gtr tf
I risk free

F Fr s FVCH fetr.IT
s Pr F PVC D

Direct
n
payoff Thong
a
payoff Thong
k free bond

so ie0
Se se
n Payoff T

ST F Long Fwd

o
 F St F PAYOFFS

NAI
D S
L
Brett
IT 0 Prices
o S P VCF

Proof big contradiction

Assume F Frcs S CHAI

and I
µ construct
an
arbitrage
seee bus

Bond Borrow 1 S Frcs

Titers
This is arbitrage hence
an

a contradiction to the NAO

hypothesis and so F Frcs

Assume FL VCS ooo

ForwardsoncouponBion
5 T
r
E to
8 f
E
towenths tylor dear 2geas
Of
6 months

5.5
I s

I rz 6

c'Eni
is

11

Pv CF s

s
Chris