CHAPTER 3
Hedging Strategies Using Futures
Problem 3.13.
If the minimumvariance hedge ratio is calculated as 1.0, the hedge must be perfect." Is this statement
true? Explain your answer.
The statement is not true. The minimum variance hedge ratio is
It i
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Question 5.9
1st term:
S 0=$ 40
R= 10%
The forward price :
T = 1 year
F0 = 40e0.1 x 1 = 44.21
Initial value is zero because this is the first entered.
2nd term:
S 0=$ 4 5
K = $40
f = S 0  KerT
= 45  4
Problem 4.8.
The cash prices of sixmonth and oneyear Treasury bills are 94.0 and 89.0. A 1.5year bond that will pay
coupons of $4 every six months currently sells for $94.84. A twoyear bond that will pay coupons of $5
every six months currently sells
CHAPTER 7  SWAP
Problem 7.9.
Companies X and Y have been offered the following rates per annum on a $5 million 10year investment:
Fixed Rate
Floating Rate
Company X
8.0%
LIBOR
Company Y
8.8%
LIBOR
Company X requires a fixedrate investment; company Y re
CHAP 2 MECHANICS OF FUTURES MARKETS
Question 3:
Suppose that you enter into a short futures contract to sell July silver for $27.20 per
ounce. The size of the contract is 5,000 ounces. The initial margin is $4,000, and the
maintenance margin is $3,000. Wh
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Question 13:
Estimate the difference between shortterm interest rates in Japan and the United States on July 13,
2012 from the information in Table 5.4.
The table indicates future quotes on Japanese yen
Chapter 2
Mechanics of Futures Markets
Problem 2.8 page 46
The party with a short position in a futures contract
sometimes has options as to the precise asset that will be
delivered, where delivery will take place, when delivery will
take place, and so on
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Problem 5.8.
Is the futures price of a stock index greater than or less than the expected future value of the index? Explain your answer.
The futures price of a stock index is always less than the expecte
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Question 9:
A oneyear long forward contract on a nondividendpaying stock is entered into when the stock price
is $40 and the riskfree rate of interest is 10% per annum with continuous compounding.
a)
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Problem 5.29.
A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $50,
and the riskfree rate of interest is 8% per annum with continuous compounding
CHAPTER 3
Hedging Strategies Using Futures
Question 3.9
Does the perfect hedge always succeed in locking in the current spot price of an asset for
future transaction? Explain your answer.
No, a perfect hedge cannot always succeed in locking in the current
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Problem 5.17.
When a known future cash outflow in a foreign currency is hedged by a company using a
forward contract, there is no foreign exchange risk. When it is hedged using futures contracts,
the dail
CHAPTER 1
Problem 1.1
What is the difference between a long forward position and a short forward position?
When a trader enters into a long forward contract, she is agreeing to buy the underlying asset for a
certain price at a certain time in the future.
CHAP 1 INTRODUCTION TO DERIVATIVES
Question 23:
A United States company expects to have to pay 1 million Canadian dollars in six months.
Explain how the exchange rate risk can be hedged using (a) a forward contract; (b) an
option.
Question 24:
A trader bu
CHAPTER 3
Hedging Strategies Using Futures
Problem 3.8.
In the Chicago Board of Trades corn futures contract, the following delivery months are available:
March, May, July, September, and December. State the contract that should be used for hedging when
t
CHAP 5 DETERMINATION OF FORWARD AND FUTURES PRICES
Problem 5.23.
What is meant by (a) an investment asset and (b) a consumption asset. Why is the distinction between
investment and consumption assets important in the determination of forward and futures p
CHAPTER 3
Hedging Strategies Using Futures
Problem 3.30  pages 61: A fund manager has a portfolio worth $50 million with a beta of
0.87. the manager is concerned about the performance of the market over the next two
months and plans to use threemonth fu
CHAPTER 3
Hedging Strategies Using Futures
Question 3.16:
Assumption:

Standard deviation Spot price=1.2

Standard deviation Future price=1.4

The correlation between F S=0.7

Its now October 15. Beef producer is committed to purchasing 200,000 pounds
CHAP 1 INTRODUCTION TO DERIVATIVES
Question 1:
What is the difference between a long futures/forward position and a short
futures/forward position?
Long futures position:
A trader enters into a long forward contract => agreeing to buy the underlying ass
CHAP 1 INTRODUCTION TO DERIVATIVES
Further Questions
Problem 1.27 (Excel file)
Trader A enters into a forward contract to buy an asset for $1000 an ounce in one year. Trader B buys a
call option to buy the asset for $1000 in one year. The cost of the opti
CHAP 1 INTRODUCTION TO DERIVATIVES
Question 10:
Explain why a forward contract can be used for either speculation or hedging
A future contract can be offered as an exchangedtraded agreement between two parties
to buy or sell an asset (a specified commod
CHAP 1 INTRODUCTION TO DERIVATIVES
Question 30:
Question 31:
Question 33:
The price of gold is currently $1,800 per ounce. The forward contracts are available to
buy or sell gold at $2,000. An arbitrageur can borrow money at 5% per annum. What
should the
Calculus Limits
Images in this handout were obtained from the My Math Lab Briggs online ebook.
A limit is the value a function approaches as the input value gets closer to a specified quantity.
Limits are used to define continuity, derivatives, and integ
13
Limits and the Foundations
of Calculus
We have developed some of the basic theorems in calculus without reference to
limits. However limits are very important in mathematics and cannot be ignored.
They are crucial for topics such as infmite series, imp
Monday, May 29,
2017
LO: Describe the process of
fractional distillation
Starter
ListOMania
List as many Hydrocarbons + Chemical
Symbols (if you can remember)
H
HHH
HH H
H H HH H
Hhydrogen
H
H
HHH
HH
HH
HH
HH
HHH
HH H
H
H
H
H
H
H
H
H
H
H H
H C H
hydroc
ABU DHABI SCHOOL OF MANAGEMENT
FALL 2016
Decision Analysis Individual Assignment
Instructor
Dr. Wolfram Wiesemann
STUDENT
Al Anoud Al Hameli212369
1. Problem Definition
The Fantastic Burgers restaurant is considering two alternatives to increase profits
CHAPTER 2:
LINEAR PROGRAMMING
I/ LINEAR PROGRAMMING (LP) PROBLEM.
Linear programming problem : Find the maximum or
minimum value of a linear expression :
ax + by + cz + . . .
Linear constraints :
x 0, y 0, z
0
Ax + By + Cz + . . .
N
Ax + By + Cz + . . .
N
Abu Dhabi University
Spring 20132014
Mathematics for Science and Technology
Mathematical Investigation Project 1:
Function:
1
x
Group Members:
1. Hawra Sayed Jawad
ID: 1046772
2. Nisma Mohamed Issam ID: 1040550
3. Zahra Ahmed Ibrahim ID: 1037423
Section
Individual Assessment
The Fantastic Burgers restaurant is considering two alternatives to increase profits:
either open a drivethrough or introduce a vegetarian burger selection (but not both).
The costs for both options are as follows:
Drivethrough
V