Convergence - the forward price

问题如下：

Parisi continues the discussion about forward prices and asks, “Is it true that the forward price on an asset must equal the spot price of the asset on the expiration date of the forward contract? Explain why or why not.”

Curry responds, “At expiration, forward prices and spot prices must converge. If the spot price exceeds the forward price, then an investor could purchase the forward contract and execute the contract to purchase the underlying at the lower forward price and sell at the higher spot price and make an arbitrage profit. If the spot price is less than the forward price at expiration, then an investor could purchase the asset at the spot price and enter into a short forward contract to sell at the higher price, thus locking in a profit.”

Is Curry’s response to Parisi regarding futures and spot prices most likely correct?

选项：

A.

No, the explanation when the spot price exceeds the forward price is incorrect.

B.

Yes.

C.

No, the explanation when the spot price is less than the forward price is incorrect.

解释：

B is correct. Curry’s response to Parisi is correct. Forward and spot prices must converge at expiration. If they don’t, then it is possible to earn an arbitrage profit. If the spot price is greater than the forward price, then one could earn an arbitrage profit by buying the forward contract and executing the contract to purchase the underlying at the lower forward price and selling at the higher spot price. If the forward price exceeds the spot price at expiration, then an investor could purchase the asset at the spot price and enter into a short forward contract to sell at the higher price, thus locking in a profit.