Hedging in cash and future

I use the continuous time model to compute the cost of carry.
F = S * e^(r*T/365)
Rearrange the above equation to find r.
r = ln(F/S) * (365/T)
This r is the annualized cost of carry, and had to be greater than your incremental borrowing cost, to justify the arbitrage.
nillohit said:
Hi Nautilus,
First and foremost, thanks a lot for showing your interest in replying my quory. You are very correct that I was a bit ambigous. Actually what i meant was correctly assessed by Ivanboesky - Arbitrage between cash and futures market to make small but riskless profit.
This hopefully cleares the confusion that has been inadvertently created. I am eagerly waiting for your views and comments.
Hi Nillohit:

I think Ivanboesky is doing a great job here and I am following the thread. If I have something useful to add I will do so.


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