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futures

  1. N

    Optimal hedge ratio with futures which expire later than holding period

    Write down the optimal hedge ratio equation for a stock portfolio and use the information provided to solve the hedging problem. Assume a fund manager has a £5 million portfolio of shares with a beta risk of 0.87. Price risks are apparent in a two –month holding period horizon. The only front...
  2. Nicole Seaman

    YouTube T3-26: US T-bond futures cheapest to deliver

    Among the T-bonds available for delivery (the short position is given a choice in order to avoid a liquidity squeeze on a single bond), the cheapest to deliver (CTD) bond minimizes the net cost. David's XLS is here: https://trtl.bz/2N9tnx4
  3. Nicole Seaman

    P1.T4.813. Binomial model for options on currencies and futures (Hull Ch.13)

    Learning objectives: Explain how the binomial model can be altered to price options on: ... currencies, and futures. Define and calculate delta of a stock option. Questions: 813.1. Below is illustrated the two-step binomial tree implied by the following assumptions for a six-month put option...
  4. Nicole Seaman

    P1.T3.707. Hedging versus speculation (Hull Chapter 1)

    Learning objectives: Describe the over-the-counter market, distinguish it from trading on an exchange, and evaluate its advantages and disadvantages. Differentiate between options, forwards, and futures contracts. Identify and calculate option and forward contract payoffs. Calculate and compare...
  5. M

    GARP.FRM.PQ.P1 Increasing Beta question

    A fund manager has a USD 100 million portfolio with a beta of 0.75. The manager has bullish expectations for the next couple of months and plans to use futures contracts on the S&P500 to increase the portfolio´s beta to 1.8. Given the following information, which strategy should the fund manager...
  6. Rohit

    Storage Costs Hull Vs McDonalds

    Hi David, Can you please explain how do we calculate forward price with storage costs when given as $ values and as % ? Between the two books I am really confused..perhaps extend this with other Cost of carry factors. Thanks in advance..
  7. Rohit

    Contango/Backwardation And Basis Relationship

    Hi David, I am trying to relate the 2 concepts here and getting a little confused - So-Fo = Basis where; So<Fo = Weak Basis, Contango and model is Cash and Carry at time = 0 if So<Fo ex. 4 and 4.2 i.e basis = -0.2 weak basis here at time = t if St<Ft ex. 4.2 and 4.3 then basis = -0.1 weak...
  8. M

    Optimal Hedge Ratio Correlation Understanding

    Hi, I have a doubt about the meaning of the hedge ratio. Hedge ratio = ρ * σ_spot / σ_fut Number of contracts = HedgeRatio * PortfolioValue / ValueFuturesContract Therefore, the lower the correlation, the lower the number of contracts. So, let's say that I have a portfolio of $ 1.000.000 of...
  9. Nicole Seaman

    P1.T3.407. Interest rates and interest rate futures

    Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual...
  10. Nicole Seaman

    P1.T3.405. Forward and futures review

    Concept: These on-line quiz questions are not specifically linked to AIMs, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical AIM-by-AIM question such that the intended difficulty level is nearer to an actual...
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