Assume that today’s settlement price on a CME EUR futures contract is 1.10405. Your performance bond account currently has a balance of $1700. The next three days settlement prices are +1%, +2% and -2% from today’s open price. Calculate the changes in the Performance bond account from daily marking to market and the balance of the performance bond account after the third day. Provide calculations where necessary to support your answer.
Macrohedging
Hedging or hedge accounting is a risk-mitigation technique used to protect the current financial position from potential losses. Hedging is often confused with speculating. The major difference between the two is that hedging does not involve guessing, whereas speculation is based on guessing the direction of movement of the underlying asset to book profits.
Finance Mathematics
The area of applied mathematics known as mathematical finance, also known as quantitative finance or financial mathematics is concerned with the mathematical modeling of financial markets. The application of mathematical methods to financial problems is known as financial mathematics. A financial market is a place where people can exchange low-cost financial securities and derivatives. Stocks and bonds, raw materials, and precious metals, both of which are regarded as commodities in the stock markets, are examples of securities. It uses probability, statistics, stochastic processes, and economic theory as methods.
Assume that today’s settlement price on a CME EUR futures contract is 1.10405. Your performance bond account currently has a balance of $1700. The next three days settlement prices are +1%, +2% and -2% from today’s open price. Calculate the changes in the Performance bond account from daily marking to market and the balance of the performance bond account after the third day. Provide calculations where necessary to support your answer.
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Assume today’s settlement price on a CME EUR futures contract is $1.3130/EUR. You have a short position in one contract. Your performance bond account currently has a balance of $1,700. The next day’ settlement price is $1.3059. Calculate the balance of the account at the end of the day. (USD, no cents)
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