Fin 400 level
Problem : 1, 2, 3, 4, 5.6, 7.8, 9.10, 11.12
Suppose that you enter into one short futures contract to sell June Gold for $920 per ounce on DieCOMEX division of the New York Mercantile Exchange. The size of the contract is 100 ounces. The initial margin is $2,000 per contract and the maintenance margin is $1,500 per contract. What price change would lead to a margin call?
Suppose that you enter into one long futures contract to buy June Silver for $11.40 per ounces on the New York Commodity Exchange. The size of the contract is 5,000 ounces. The initial margin is $4,000 per contract and the maintenance margin is $3,000 per contract. What price change would lead to a margin call?
At the end of one day a clearinghouse member is long 100 contracts, and the settlement price is $49,000 per contract. The original margin is $2,000 per contract. On the following day the member becomes responsible for clearing an additional 30 long contracts, entered into at a price of $48,000 per contract. The settlement price at the end of day is $48,500. How much does the member have to add to its margin account with the exchange clearinghouse?
The wall street journal quotes Crude Oil Futures as of January 5,2008 as June 2008 for $86.66 and December 2008 for $89.17 . Suppose that there are no storage cost for crude oil and the interest rate for lending or borrowing is 12% per annum. How much could you make () profits on January 5,2008? Specify your strategy.
It is March 1. A U.S. company expects to receive 12.5 million Japanese yen at the end of July. The September futures price for the yen is currently 0.96 cents per year. Its Hedging strategy is as follows:
1) Take a ( ) position in one September yen futures contract on March 1 at a futures price of 0.96
2) Close out the contract when the yen arrive at the end of July.
If the Spot price and September futures price at the end of July are 0.91 and 0.93, respectively. What will be the net exchange rate after hedging?
It is June 8. A Company will need to purchase 20000 barrels of crude oil some time in November. The current December oil futures price is $90 per barrel. Its Hedging strategy is as follows:
Take a ( ) position in 20 December oil futures contracts on June 8 at a future price of 0.96.
Close out the contract when ready to purchase the oil.
If the spot price and December futures price when the company is ready to purchase oil on November 10 are $98 and $93, respectively, what will be the net cost of oil after hedging ?
The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 0.8. The standard deviation of monthly changes in the future price of live cattle for the closest contract is 1.2. The correlation between the futures price changes and the spot price changes is 0.6. It is now January 15. Abeef producer is committed to purchasing 400000 pounds of live cattle on May 15. The producer wants to use the June live-cattle futures contracts to hedge its risk. Each contract is for the delivery of 40000 pounds of cattle. What strategy should the beef producer follow?
1) The optimal hedge ratio is ( )
2) The beef producer should take a long position in ( ) June contracts closing out the position on May 15.
It is February 16. A company has a portfolio of stock worth $100 million. The beta of the portfolio is 0.8. The company would like to use the CME June futures contract on the S&P 500 to change the beta of the portfolio to 1.2 during the period February 16 to May 16. The index is currently 1000 and each contract is on $250 times the index. The company should take a ( ) position in ( )contracts.