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Unformatted text preview: s Over the Counter
Hedging (95%) Very speculative (95%)
Daily marked to market
Reset at the new price No Clearing House No Margin Requirement No
47 Daily settlements
Today Morning Sell Wed Futures
Monday Close Futures ↑ to 155
Marked to Market ……………. Payoffs
Margin Tuesday Close Futures to 149
Marked to market Reset at….
Futures ↑ to 160
Marked to Market Reset at … 48 Hedger or Speculator
Hedger Settlement at maturity
Net price =
Speculator Get out any time Rule : Make Profit if Price drops ~ Short Position
Make Profit if Price increase ~ Long Position
Assets 100 Liabilities
10 Duration of Assets = 5 yrs, Duration of Liabilities= 3 yrs
Current rate = 10%,
Δ Equity if Expect the interest rates to increase by 1%?
ΔE = - [DA - DL * (L/A)] *A *Δr/(1+r) 50 Case 1 No Basis Risk
No basis risk? Δr in Futures = Δr in Spot Futures position? Make “$” if Rates go up
Now : Short Futures Contracts and
Maturity : Buy Ba...
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This note was uploaded on 03/12/2014 for the course FINE 442 at McGill.