Forward contracts Action Cash Flow at t Cash Flow at T Buy l Unit T of asset Short 1 forward Contract Borrow s St (T-t) at rate r S r(T-t) T T 0 Charles caoForward Contracts Action Buy 1 Unit of Asset Short 1 Forward Contract Borrow $ at rate r Cash Flow at t Cash Flow at T − St ST F − ST St r(T t) t S e − − 0 ( ) + − − = r T−t T T t 0 S F S S e St 11 Charles Cao