Mid-Session Exam_addition - Trading on futures contracts...

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8/14/2012 1 Mid Session Exam The midsession exam will take place during the lecture time in week 6. The tutorials will be o discuss the project and the topic on currency swap. You need to bring your student ID and calculator to the exam. 1 Exam format: 20 MC questions (1 mark for each question) and 1 long question ( 10 marks in total ) Duration: 1.5 hours including reading time. Reading List Textbook: Ch. 1: 1.1 1.10 Ch. 2: 2.1 2.7, 2.11 Ch. 3: 3.1 3.5 N h h f l (3 ) i h b k i i lifi d 2 Note that the formula (3.5) in the textbook is a simplified formula to deal with hedging portfolio risk using index futures. During the exam, you need to use the formula provided in the lecture note when the cross hedging is involved. Ch. 5: 5.1 5.13 Lecture notes from week 1 to week 5 Revision for mid session exam Fundamentals of futures and forward contracts Definition of futures and forward contacts Difference between futures and forward contracts Payoffs from forward contracts 3 Daily settlement and Margin requirements
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Unformatted text preview: Trading on futures contracts Type of traders and their objectives Specification of a futures contract Open interest and trading volume Revision for mid ‐ session exam Pricing futures contracts Spot, forward, & futures prices and expected spot price in the future. Is futures price the same as forward pric ? 4 Is futures price the same as forward price? Value of a long forward contract Cost ‐ of ‐ carry relations for different underlying assets Arbitrage opportunity (strategies and risk ‐ free profits) Revision for mid ‐ session exam Hedging with futures Basis and Basis risk determining futures (long or short) positions and number of contract 5 and number of contracts • Mismatched maturity (h1) and mismatched underlying asset (h2) Estimation of hedge ratio Evaluation of hedging effectiveness (effective price and net gain/loss)...
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