In Class Exercise 6

In Class Exercise 6 - Fin536 Exercise 6 Ch8 FX futures and...

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Fin536 Exercise 6 Ch8 FX futures and options 1 1. What is a currency future? How to compute its price? Explain the price convergence in futures and spot markets at maturity. Plot the payoff profile for a long position and a short position in a currency future respectively. 2. What is the mark-to-market rule in futures trading? How can a buyer (seller) of futures avoid actual delivery of the FX in the contract at maturity day? 3. (Mark-to- market) You enter a long position in a € future contract with the size of €125,000 today. The futures expire in 90 days. The interest rates are i $ =1% and i =3%. The current spot rate is $1.4/€. Assume 360 days a year. a. What will be the price of the futures you enter? b. If the spot rate is $1.45/€ the next day and interest rates remain the same, what will be the price of the futures on the next day? How much is your profit or loss for this day? 4.
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This note was uploaded on 12/06/2011 for the course FIN 536 taught by Professor Staff during the Fall '11 term at S.F. State.

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In Class Exercise 6 - Fin536 Exercise 6 Ch8 FX futures and...

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