A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices.< a. Determine the effective price at which the corn was sold on December 10. < b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position.< Date February 6 March 15 March 15 May 16 May 16 July 22 July 22 September 174 September 174 December 12 December 12 Action Sell March Futures Buy March Futures Sell May Futures Buy May Futures Sell July Futures Buy July Futures Sell September Futures Buy September Futures Sell December Futures Buy December Futures Sell Cash Inventory Price $5.73 $6.20€ $5.90€ $5.10€ $5.30€ $5.70€ $6.20€ $6.90€ $6.95€ $6.50€ $6.45€
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- On 1st of March the crude oil’s spot price is $50 and its August futures price is $48. On 1st of July the spot price is $62 and the August futures price is $63.50. An ABC company entered into futures contracts on 1st of March to hedge its purchase of the commodity on 1st of July. It closed out its position on 1st of July. Which position must be taken to hedge the risk and what is the effective price (after the hedging) paid by the company? Choose the right answer a. No correct answer b. Short, $15.50 c. Long, $46.50 d. Long, $15.50 e. Short, $46.50Suppose a oil producer wants to hedge against possible price fluctuations in the market. For example, in November, he decides to enter into a short-sell position in a 2 (two) futures contracts in order to limit his exposure to a possible decline in the cash price prior to the time when he will sell his oil in the cash market. Assume that the spot price of oil is $30 and the futures price for a March futures contract is $45. What is the basis? Выберите один ответ: a. 30 b. 7.5 c. 25 d. 15 e. 45In the futures markets, when the initial margin of a futures account is topped up daily to cover adverse futures price movements, this is called: a. maintenance margin call. b. closing-out. c. short call. d. marked-to-market.
- If you place an order to buy or sell a share of an open-ended mutual fund during the trading day, the order will be executed at ____________. A. the NAV at the time you place the order B. the NAV calculated at the opening of the next day's trading C. the NAV delayed 15 minutes D. the NAV calculated at the market close on the day E. the market price at the time you place the orderSuppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarterly changes in a futures price on the commodity is $0.81, and the coefficient of correlation between the two changes is 0.8. What is the optimal hedge ratio for a three-month contract? What does it mean? Explain what is meant by basis risk when futures contracts are used for hedging.Given the following information for December 24 corn futures, identify the "In the Money", "At The Money", and "Out of the Money" 22 puts and Calls. The December 24 futures price is $4.71. Also, calculate the intrinsic and extrinsic values of the premiums. 24 25 26 27 28 29 30 31 32 33 34 35 36 37 \table[[Strike,Premium],[Prices,Puts,Monies],[5.2,0.655,Out],[5.1,0.583,In],[5,0.513,At],[4.9,0.447,Out],[4.8,0.386,],[4.7,0.33,],[4.6,0.276,],[4.5,0.227,],[4.4,0.185,],[4.3,0.147,]] \table[[Puts,,],[Intrinsic,Extrinsic,Calls],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]
- On the 1st of March, a commodity’s spot price is $60 and its futures contract price with maturity in August is $59. On the 1st of July, the commodity spot price is $64 and its futures contract price with maturity in August is $63.50. A company entered into the futures contracts on 1st of March to hedge its purchase of the commodity on July 1. It closed out its position on July 1. What is the effective price (after taking account of hedging) paid by the company? $60.50 $61.50 $63.50 $59.50The basis is defined as spot minus futures prices. Evaluate which of the following is most likely to contribute to an increase in basis risk. Select one alternative A large difference between the futures prices when the hedge is put in place and when it is closed out. Increased similarity between the underlying asset of the futures contract and the hedger’s exposure. An increase in the time between the date when the futures contract is closed and its delivery month. None of the other answers.On a particular day, there were 2, 000 trades in a particular futures contract. This means that there were 2,000 buyers (going long) and 2,000 sellers (going short). Of the 2,000 buyers, 1,400 were closing out positions and 600 wereentering into new positions. Of the 2, 000 sellers, 1, 200 were closing out positions and 800 were entering into newapositions. What is the overall impact of the day's trading on open interest? (please show necessary calculations)
- At time t = 0, a trader takes a long position in a futures contract on stock i that willexpire at time T. the present value of this contract to the long is given by: See Image. Assume no-arbitrage price, briefly descthat if the return from stock i is positively correlated with the overall return on the stock market, then the futures market must be in backwardation at time t = 0.(a) The transferring of risk onto the clearing house is not something unique to futures trading. In fact, most of financial intermediaries such as insurance companies, finance companies and bank take on risk transferred to them and manage these risks. Based on the above statement, discuss the TWO (2) types of margins in derivatives markets. (b) You as a farmer have gone short 15 March Cocoa futures contracts. The 5-day period using hypothetical futures settlement prices. On the day 0 which both parties enter the contract. Given the following information, determine the daily marking-to-market adjustment to both you and the counterparty account. (Assuming same total value) Contract size = 10 tons per contract Initial margin = 10 percent of total value Maintenance margin = 70 percent of initial marginA portfolio manager decides to adjust the beta of his $101148 equity portfolio from 0.5 to 1.3 for the next five months. The manager selects a future on the market index, which is currently traded at $487, to adjust the beta of his equity portfolio. The expectation about the market underpinning the adjustment of beta and the number of futures contracts the manager should take are: a. The market will be moving up, and a long position in 166 futures contracts should be held b. The market will be moving down and a short position in 104 futures contracts should be held c. The market will be moving down, and a long position in 270 futures contracts should be held d. The market will be moving up, and a short position in 166 futures contracts should be held Which of the following best describes the role of central clearing parties a. CCPs are used to manage price risk of futures transactions b. CCPs services are used in all OTC derivative transactions c. CCPs help market participants to…