You have the following data on different rates for the same, Ask an Expert

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You have the following data on different rates for the same maturity of 1.5 years. However the rates are quoted on different basis and compounding frequencies:

Continuously compounded rate: 2% per annum (i.e. annualized)

Continuously compounded rate: 3% over the holding period (i.e. over 1.5 years)

Annually compounded rate: 2.1% per annum

semi-annually compounded rate: 2.01% per annum

You are looking for an arbitrage opportunity. Is there any mispricing here and if so how would you execute the arbitrage?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92648521

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