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Creating Equity out of Cash

  1. Long stock + Short Futures= Long risk free bond.

​​​​​​​​​​​The left hand side long stock and short futures cancel each other out and end up at break even position. Then, how come it yields return close to risk free bond?

Also the concept of creating equity out of cash is not clear to me..

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Futures is based on risk free rate. The left sude dies not cancel out.

F = S0(1+Rf)t

125mph wrote:
The left sude dies not cancel out.

Someone needs to type more slowly.


Simplify the complicated side; don't complify the simplicated side.

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