proving future and forward prices are equal

i didnt quite understand the answer to Q2(i), CID April 2000.

I've posted to Wilmott on this one for a hopefully quick response:

http://www.wilmott.com/messageview.cfm?catid=8&threadid=36388

if anyone here knows feel free to respond.

 

gareth,

looking at your post...
this is same standard proof in core reading and in hull..future forward prices equal deterministic interest rates..

for a futures position, no cashflows at inception, only margin cashflows in the intervening periods till maturity
forward position, agian no inception cashflows, only maturity cashflow

in this proof, both positions have long bond initial investment (Fo or Go) to create identical expiry values...
hence identical expiry payoffs means identical initial investment by no arbitrage

 

soz,
typo in first sentence

future prices = forward prices under deterministic interest rates or whatever the standard conditions were...

 

omg i looked everywhere but the core reading for this.

must need more sleep or something!

cheers m8.

 

Where exactly is this in Hull?

*this should have been CiD April 2002 qus 2(i)

 

This proof has been taken out of the course now. So don't worry.