Suppose a stock pays no dividends, then the prepaid forward price = current stock price.
Why would I buy a prepaid forward instead of just outright buying the stock?
They both cost the same.
If I owned the stock from now until time t, the expiration date of the prepaid forward, then if the stock price were to jump significantly before the time t I could sell the stock and make a profit. If I merely owned the prepaid forward I can't do that.
Why would I buy a prepaid forward instead of just outright buying the stock?
They both cost the same.
If I owned the stock from now until time t, the expiration date of the prepaid forward, then if the stock price were to jump significantly before the time t I could sell the stock and make a profit. If I merely owned the prepaid forward I can't do that.
Wait, what is the point of buying a prepaid forward again?
