Hi,
I have a conceptual question. Now under the carry arbitrage model when the underlaying is fixed income. how does it work not in term of pricing the forward contract but in term of the process itself. i mean does the forward writer borrow money, buy bond write forward contract to sell the bond at future date, sell it at time T and pay the borrowed money. is it the same process as when the underlaying is equity with cash flow. I’d really appreciate it if someone explains it with step by step scenario with numbers. Thank you guys…