Wanna hear a counterintuitive but well known secret? Every asset trades at a price such that the expected return is the risk-free rate. If you don’t believe it, try to find someone that will offer you more than the risk free rate. You won’t. Hint: ask for a forward price
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I mean, even “a long spot/short forward portfolio earns the risk free rate” is not true, the proof is the continued existence of fixed income cash and carry trades (or crypto cash and carry if you want to be spicy)
Thanks. Twitter will use this to make your timeline better. UndoUndo
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Yes. Completely agree with that. I didn’t say the latter, though.
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Sure sounded like you said the latter!
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exactly, this is an observation about the price of a forward (cost of $) not the price of the underlying (cost of asset).
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[in which case its phrased wrong and the dunks are worthy]
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