Jonal o Conmpoay I in in Rach Volm I No 03 Jonal o Conmpoay I in in Rach IN 305-877 Onlin 03 Vol No 39-43 Copyigh o h Acamic Jonal JCIR All igh HE CO-OF-CARRY FORLA O DEERINE FRE PRICE: HO RONG CAN YO E? * NORRE LINDE Nowgian niiy o cinc an chnology ARAC In hi no w analyz h picing o o ing h co-o-cay omla o min pic hn h nlying a i a ha o ock h ign o h picing o i baically min by h ign o h colaion bwn h ock n an ho-m ik- in a hn h nlying a i a zocopon bon h owa pic i an pp bon o h picing o Kywo: Co-o-cay Fomla; Fowa Pic; F Pic; Picing Eo JEL Claiicaion: G G3 INRODCION I i wll known i in a a miniic ha owa- an pic coinci g Cox Ingoll an Ro 98 How h i plny o mpiical inc howing ha in a ol anomly o im poibly caing owa- an pic o i Fowa pic can in hoy aily b min om h pic o a a ing h co-o-cay omla In many i no mo inocoy xbook in inanc h co-o-cay omla i alo o min pic h qion w lik o a in hi no i How wong can yo b i yo apply h co-o-cay omla o min pic?" hi no conib o h lia on conac in wo way Fi w i o bon o h pic whn i i ima by h co-o-cay omla h o bon inica ha h picing o can b lag conly w illa wih wo nmical xampl ing aliic paam al ha h picing o a likly o b mall ECONOIC E-P am a compl an abiag- mak wh aing ak plac in conino im olo chnical coniion h hn xi an qialn maingal ma Q wh pic poc o non-iin paying a a maingal whn icon wih h bank accon Fo analyical impliciy w am ha h olion o in a can b cib by a Gaian ion o h Hah Jaow an oon amwok Hah Jaow an oon 99 h hom ik- in a a om poin in im n Q i hn gin by wh i h inanano owa a o im pailing a im i a woimnional co o miniic olailiy ncion an i a wo-imnional co o * h iw o opinion xp in hi mancip a ho o h aho an o no ncaily lc h poiion iw o opinion o h io h ioial boa o h pblih Coponing aho Email: nolin@nnno 39
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Jonal o Conmpoay I in in Rach Volm I No 03 00 095 090 085 080 075 070 065 FIGRE 0 3 4 5 6 7 8 9 0 Fig : h ig how pic o in choic o Paam al a 00396 0 an 05 h high pic o lin a o 00 an h low o 0 Fowa pic a high han h pic b in h ig hy canno b iingih om h high pic Faco ha may b lan o xplaining any inc bwn owa- an pic ha w ha xcl om h analyi h incl anacion co collaal an conpay ik CONCLION In hi no w analyz pic in an conomy wih ochaic in a an a-picing mol o i o bon o h pic whn i i ima by h co-ocay omla h o bon a no igh implying ha h picing o can b lag h magni o h o pn on h paam o h mol How aliic paam al in combinaion wih h ho im nill xpaaion o conac on l han h o ix monh la o mo picing o illa hi ac wih nmical xampl o conac on a non-iin paying ock an on a zo-copon bon REFERENCE Cox J Ingoll J & Ro 98 h Rlaion bwn Fowa Pic an F Pic Jonal o Financial Economic 9 4 3 346 Fnch K R 983 A Compaion o F an Fowa Pic Jonal o Financial Economic 3 3 34 Hah D Jaow R & oon A 99 on Picing an h m c o In Ra: A Nw hoology o Coningn Claim Valaion Economica 5 77 06 iln K & Pon A 999 Picing Ra o Rn Gaanin a Hah-Jaow-oon Famwok Inanc: ahmaic an Economic 5 3 307 36 ila & Rkowki 997 aingal ho in Financialoling ping Vlag lin Hilbg 43