Enter a long forward to purchase WTI Oil in 3 months for $44, then short sell a barrel of oil today for $43 and invest the proceeds in the bank.

Enter a short forward to deliver WTI Oil in 3 months for $44, then simultaneously enter a long forward contract to buy oil in 3 months at the fair price of $45.

Enter a short forward to deliver WTI Oil in 3 months for $44, then borrow $43 and buy a barrel of oil today in the spot market for $43.

Enter a long forward to purchase WTI Oil in 3 months for $44, then simultaneously enter a short forward contract to deliver oil in 3 months at the fair price of $45.

Borrow money and buy the underlying asset

Borrow money and short sell the underlying asset

Short sell the underlying asset and invest the proceeds in the bank

Short sell the underlying asset and borrow money

Investment strategy A is very safe. No matters what happens, it will generate a guaranteed payoff at time T of $100.

In contrast, the future payoff to investment strategy B is highly uncertain -- it could be high or low. Nevertheless, strategy B has an expected payoff is $100.

 Since A and B both have expected payoffs of $100, the cost to enter both strategies today must also be identical.

The future payoff to an investment strategy is known today with complete certainty. Therefore, the spot price to enter this strategy today will be such that whoever enters today will earn the riskfree rate of interest over the investment horizon.

Investment strategy A always generates the same future payoff as investment strategy B. It follows that the current price to enter A must be identical to the current price to enter B.

An investment product is structured such that its payoff at future time T is guaranteed to be $0. It follows that the current price to enter this strategy must also be $0.

All of the above are consistent with the notion that there are no arbitrage opportunities.

The trader has made a gain of $180

The trader has made a loss of $180

The trader has made a gain of $18,000

The trader has made a loss of $18,000

The risk is that the AUD will weaken against the peso.

You face no exchange-rate risk since your customers pay in AUD.

Mexico borders the USA so you are exposed to the AUD weakening relative to the USD.

The risk is that the AUD will strengthen against the peso.

GBP 1.00 = EUR 1.20

GBP 1.00 = EUR 1.14

GBP 0.88 = EUR 1.00

GBP 0.83 = EUR 1.00

Both (a) and (d) reflect a strengthening GBP

Both (b) and (c) reflect a strengthening GBP