Rolling Forward and Spot Deferred Contract of American Barrick
Assume that American Barrick (AB) agreed to sell 200 ounces of gold in the spot deferred contract (SDC).
The SDC has two conditions: (1)
Hedging Strategies Using
Futures
Chapter 3
Fundamentals of Futures and Options Markets, 9th Ed, Ch3, Copyright John C. Hull 2016
1
Long & Short Hedges
A
long futures hedge is appropriate when
you know
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Terminology for Futures Markets
Basis = current spot/cash price  futures price (nearby contract)
The basis should be zero at the expiration date (T) of the futures contract to prevent
arbitrage profi
Collar Strategy for Hedging Risk
Equity collars are used by investors, such as corporate insiders and managers of nondiversified
portfolios, whose primary concern is the downside risk of a stock posi
Quiz #1, _ Q _ Spring 2017
Total points = , ' Name: Keg
Q#1. JetBlue Airlines will purchase 6 million gallons of jet fuel in six months and would like to
hedge the risk of higher jet fuel prices using
American Barrick Resources Corporation: Managing Gold Price Risk
American Barrick Resources Corporation (ABX) was one of the worlds largest goldmining firm in
1992. This case illustrates the use of f
CORPORATE FINANCIAL POLICY
BUS 135, SPRING 2017
CASE PRESENTATION, REBUTTAL, AND WRITEUP GUIDELINES
The class will be divided into seven groups or teams. Presentations and rebuttal will be a team eff
Applications of BlackScholesMerton Model for Pricing European Options
The BlackScholesMertons model can be used directly to price the following European options.
1. Options on dividend and nondiv
I_
Two US. Economists Win Nobel Prize
j!
Merton and Scholes Share
Award for Breakthrough
In Pricing Stock Options
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL
Two economists wi
EXHIBIT 3.5
Free: TeeIe fer e Ce ireree CeII Oetr'en
3'3 Current Sleek Price = 40
Current Cetien Price = 4t]
15
1D
E
it. D
E ,
2 Stcclt Price et Expiretien
_5 1":
1Et
E
u:
Steelt Price at I 'I
Yash Patel
Business 135 Corporate Financial Policy
Professor Sarwar
May 4, 2017
Case Write Up: R.J. Reynolds International Financing
The R.J. Reynolds case is focused around its $4.9 billion acquisiti
Hedging the Spot Market Risk Exposure Using Futures
1. Minimumvariance hedge ratio= h*= () (S/F) = (Average change in S)/(Average change in F)
= Correlation between S and F; S = standard deviation o
I.
Problems facing the company
JetBlue Airways was a low budget airline service that differentiated themselves from the
competition by providing its customers with benefits such as entertainment and t
I.
Problems facing the company
Florida Power and Light Company, or FPL is known as the state of Floridas largest electric
utility company. In its earlier years, FPL was operating its business in an ef
I.
Problems Facing the Company
American Barrick Corporation was founded in 1983 and was run by Peter Munk who was
the corporations CEO. In 1984, the market capitalization of the firm rose from $46 mil
Name:
Q #1. (. points) A stock sells for $110. A call on the stock has an exercise price of $105 and expires in
150 days. The annual interest rate is 11% (or 0.1 1) and the annual standard deviation (
Trading Strategies
Involving Options
Chapter 11
Fundamentals of Futures and Options Markets, 9th Ed, Ch 11, Copyright John C. Hull 2016
1
Strategies to be Considered
Bond
plus option to create princi
Table for N (x) When x 2 0
c This table shows values of N(x) for x 2 0. The table should be used with interpolation. For example,
N(O.6278) = N(0.62) + 0.78[N(0.63) N(0.62)]
. = 0.7324 + 0.78 x (0.735
Profit Table for a Bullish Call Spread
20 Current Stock Price = 40
Current Option Price = 7.0 (Call 35)
2.0 (Call 45)
15
10
Net Prot
0
Stock Price at Expiration

Stock Price at I I I I I I I
Quiz #2, BUS 135, Spring 2017
Name: \Ceva'
Q#l (14 points). On March 21, 2015, you purchased 5,000 shares of ABC company at $12 per
share. You plan to sell your shares on December 21, 2017 and are con
so + no +0
Futures price
500 T)(l + C)
Time
Models of futures prices 91
TablcSIl " Anlllustrauo o .noarblill g. . . ,4
Prices for the analysis Spot price of gold $400
Interest rate (bor
BUS 135 Reading List, Spring 2017
Case
Finance Topic
Reading Material*
R.J. Reynolds
Eurobonds, currency forwards,
Swaps, international financing
Chaps 2, 3, 6 (Hull Book);
iLearn notes
Walt Disney
He
BlackScholesMerton Option Pricing Formula
C = S N(d1)  e(rT) X N(d2)
(1)
d1=cfw_[ln(S/X)+(r+(2/2)T]/(T)
d2= d1 T
where
C= value (premium) of the call option
S= current stock price
X= exercise pri
BUS 135 Study List for Final Exam
1. RJR and Disney Harvard Cases.
Students should be able to understand the conceptual and analytical aspects of forward, futures, and
swap contracts. Students should
Valuation Based on Adjusted Present Value
Year
2013
Growth Rate
Sales
$630
EBIT (10% sales)
$63.0
Less: Tax (35%)
$22.05
Net Income
$40.95
Plus: Depreciation
Less: Capital Expenditures
Less: Increase
Stock Valuation and Capital Gain and Dividend Yield estimations.
D
R
Super g Constantg
T
$1
12%
30%
5%
D
1/(1+r)^t
PV(D)
0
$1
1
2
3
4
5
$1.30
$1.69
$2.20
$2.86
$3.71
Estimation Price at t=1
1
$1.69
2