Hello all(adsbygoogle = window.adsbygoogle || []).push({});

I encountered the following problem:

A particular forward contract costs nothing to enter into at time t and obligates the holder to buy the asset for an amount F at expiry, T. The asset pays a divident DS at time t(sub-d), where 0 <= D <= 1 and t <= t(sub-d) <= T. Use an arbitrage argument to find the forward price F(t)

Here is what I did:

I made a chart

Holding Worth Today(t) Worth at maturity(T)

Forward 0 S(T) - F + DT

-Stock -S(t) -S(T)

Cash S(t) + S(t-sub(d)) S(t) + e^(r(T-t))

Total S(t-sub(d)) + S(t) + e^(r(T-t)) - F

I need to solve for F. Am I approaching this problem correctly? Any help would be greatly appreciated!

Thanks

**Physics Forums | Science Articles, Homework Help, Discussion**

Join Physics Forums Today!

The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

# An Arbitrage Problem

**Physics Forums | Science Articles, Homework Help, Discussion**