DATA
Ans.
a) Since payment is needed to be made in Japanese Yen, hence to avoid exchange risk one is needed to buy Japanese Yen Futures contract.
b) As the payment is required to deliver in January itself and most Liquid Contract available is MARCH 19 (liquid contract has lesser Impact cost) so we should choose MARCH19 contract to hedge the position.
Position Size: Amount to be hedged/ Contract Size
= 90,000,000/12,500,000
= 7.2 contract needed to buy
But since contract size is standardized hence fractions are not allowed so we should buy 7 contract to hedge our positions.
c) Mark to Market (M2M Position) :
For one point movement in JPY value of contract move by $1250
Contract is entered at price of 92.265+0.29 =92.555
on 16th Jan JPY fallen by 0.29 points settled at 92.265 so M2M will be 7*1250*0.29=$2537.5 minus (loss on positions)
on 17th Jan JPY fallen by 0.32 points settled at 91.945 so M2m will be 7*1250*.32= $2800 minus (loss positions)
and for 18th Jan fallen by 0.445 points so M2M will be 7*1250*0.445=$3893.75 minus (loss on positions)
d) Hence the total cost incurred will be the loss/profit on the positions
as mentioned above the M2M minus = $(2537.5+2800+3893.75)=$9231.3 (loss)
e) If the position would not have been hedged then one would have been stand to gain 0.939 on per JPY and by hedging it actually incurred loss in comparison to without hedged position and situation may have just oppose in case if JPY moved up during the same time.
You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday,...
You have to make a 90,000,000 payment in Japanese Yen on close
of business day, Friday, January 18th. You decide to hedge your
risk with the futures contracts. Assume you that you enter into the
futures position at a close of day on Tuesday, January 15th.
Futures and spot data are provided BELOW. Contract size is
12,500,000 yen.
Describe the position you decide to enter (long or
short).
Describe the contract (what month, and what
quantity).
Document the gain or...
You have to make a
90,000,000 payment in Japanese Yen on close of business day,
Friday, January 17th. You decide to hedge your risk with the
futures contracts. Assume you that you enter into the futures
position at a close of day on Tuesday, January 14th. Futures and
spot data are provided in the file HW1_data.doc. Contract size is
12,500,000 yen.
Describe the position you decide to enter (long or short).
Describe the contract (what month, and what quantity).
Document...
Name Chapter 3 1) You observe a quotation of the Japanese yen (K) of $0.007. You are, however, interested in the number of yen per dollar. Thus, you calculate thequotation of /s a. direct; 142.86 b. indirect; 142.86 c. indirect; 150 d. direct; 150 e. indirect, 0 2) Which of the following is probably NOT appropriate for an MNC wishing to reduce its exposure to British pound payables? a. Purchase pounds forward b. Buy a pound futures contract c. Buy...
Use the following corn futures quotes: Contract Month Mar May July Sep Corn 5,000 bushels Open High Low Settle 455.125 457.000 451.750 452.000 467.000 468.000 463.000 463.250 477.000 477.500 472.500 473.000 475.000 475.500 471.750 472.250 Chg Open Int -2.750 597,913 -2.750 137,547 -2.000 153, 164 -2.000 29,258 Suppose you buy 19 of the September corn futures contracts at the last price of the day. One month from now, the futures price of this contract is 462.625, and you close out...
Use the accompanying chart of currency futures market activity,
for Wednesday, December 30, 2010 to answer this question. Of the
seven currency futures shown, using the March, 2011 contracts only,
assuming equal volatility for each currency, which one had the
highest fairly priced dollar value for its at the money 90 day
calls?
Currency Futures Trading Summary for Thursday, December 30,
2010
Japanese Yen (CME)-12,500,000; $ per 100% LIFETIME Open High Low Settle Chg High (▲ ▼) Low 1.0621 1.1021...
value: 10.00 points Suppose you purchase the June 2014 call option on corn futures with a strike price of $5.00 at the last price of the day. Use Table 23.2 How much does your option cost per bushel of corn? (Do not round intermediate calculations. Round your answer to 5 decimal places, e.g., 32.16161.) Option cost per bushel What is the total cost of your position? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and round...
3. value: 10.00 points Suppose you purchase the June 2014 call option on corn futures with a strike price of $5.00 at the last price of the day. Use Table 23.2 How much does your option cost per bushel of corn? (Do not round intermediate calculations. Round your answer to 5 decimal places, e.g. 32.16161.) Option cost per bushel What is the total cost of your position? Assume each contract is for 5,000 bushels. (Do not round intermediate calculations and...
HOME ASSIGNMENT
PROBLEM №1
What is a forward price of an index JKL given the following
information?
Date of pricing: November 15, 2019
Time till expiration: four months / Contract expires on March
15, 2020
Current value of an index: 2 803
Continuously compounded interest rate: 4.5 %
Continuously compounded dividend yield: 2.3%
PROBLEM №2
What is the value of the forward contract (specified in
problem №1) on January 15, 2020 if:
Forward price of contract with the same underlying...
Refer to the Mini-S&P contract in Figure 22.1. Assume the
closing price for this day.
a. If the margin requirement is 29% of the
futures price times the contract multiplier of $50, how much must
you deposit with your broker to trade the December maturity
contract? (Round your answer to 2 decimal
places.)
b. If the December futures price were to
increase to 2,091.73, what percentage return would you earn on your
net investment if you entered the long side...
Og revest Futures Contracts Metal & Petroleum Futures Contract Open Hgh to low Settle Copperh onco 25.000s.Sperti 2700 275 297 22915 2004 20 2.072S LOS Gold D-100 ty pertroyer - U TISKO TON TON 1922 1100 15 TO WO 1150 115 17. 1150.00 DL 1100 DM UM noms-Strypto EI EGÉSes S&S ESSE Contact Open Hy belo Se Og Het Sugar-World 112000 sparta May 1242 123 1235 1294 2 993 120 22 129 J Sugar-Domesticos-us-112000 h.cosper 245 245 246 25 -...