Futures Basis Calculation - Quant Trader Interview Question
Difficulty: Medium
Category: Market Microstructure
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: futures, basis, cost-of-carry, arbitrage
Problem Description
You are a trader analyzing the futures basis for a commodity. The current spot price of the commodity is 100 dollars. The futures contract expiring in 3 months is trading at 105 dollars. The risk-free interest rate is 4% per annum, continuously compounded.
Assuming no storage costs or dividends, what is the approximate implied cost of carry (as a percentage per annum) included in the futures price, beyond the risk-free rate? Assume a year has exactly 365 days.
Practice this medium trader interview question on MyntBit - the all-in-one quant learning platform with 200+ quant interview questions for Jane Street, Citadel, Two Sigma, and other top quantitative finance firms.