the price suggested by the carry arbitrage model

问题如下：

Doyle and Kemper discuss the carry arbitrage model and how they can take advantage of mispricing in bond markets. Specifically, they would like to execute an arbitrage transaction on a Eurodollar futures contract in which the underlying Eurodollar bond is expected to make an interest payment in two months. Doyle makes the following statements:

Statement 1: If the Eurodollar futures price is less than the price suggested by the carry arbitrage model, the futures contract should be purchased.

Statement 2: Based on the cost of carry model, the futures price would be higher if the underlying Eurodollar bond’s upcoming interest payment was expected in five months instead of two.

Which of Doyle’s statements regarding the Eurodollar futures contract price is correct?

选项：

A.

Only Statement 1

B.

Only Statement 2

C.

Both Statement 1 and Statement 2

解释：

Doyle’s first statement is correct. Unless the Eurodollar futures contract’s quoted price is equal to the no-arbitrage futures price, there is an arbitrage opportunity. Moreover, if the quoted futures price is less than the no[1]arbitrage futures price, then to take advantage of the arbitrage opportunity, the Eurodollar futures contract should be purchased and the underlying Eurodollar bond should be sold short. Doyle would then lend the short sale proceeds at the risk-free rate. The strategy that comprises those transactions is known as reverse carry arbitrage.

Doyle’s second statement is also correct. Based on the cost of carry model, the futures price is calculated as the future value of the sum of the underlying plus the underlying carry costs minus the future value of any ownership benefits. If the Eurodollar bond’s interest payment was expected in five months instead of two, the benefit of the cash flow would occur three months later, so the future value of the benefits term would be slightly lower. Therefore, the Eurodollar futures contract price would be slightly higher if the Eurodollar bond’s interest payment was expected in five months instead of two months.