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5. Delivery more likely takes place in forwards contracts than in futures contracts.
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- Which statement is true about the difference between futures and forward contracts? 1. Futures contracts have a fixed price, while forward contracts have a price determined at the maturity. 2. Futures contracts are settled at the end of the maturity, while forward contracts are settled daily. 3. Futures contracts are traded on the exchange, while forward contracts are traded on CCP. 4. If there are significant price fluctuations before the maturity date, futures contracts can lead to more unfavorable results compared to forward contracts. 5. None of them.6. Futures contract are settled daily and usually closed out prior to maturity.10. There are no daily price limits in futures contracts.
- Question 6 (6 points): Hedge March 15th: A packer needs to buy Live Cattle in early June. Currently the June Live Cattle (LC) futures are trading at $175.650/cwt. The expected basis is $1.50/cwt. • Does the packer have a long or short cash position?. • Does the packer have a long or short futures position? (buy/sell) June LC futures at • • To hedge: The packer will $175.650/cwt. What is the expected price? June 10th. • The packer must. (buy/sell) cattle locally in the cash market at • $185.025/cwt. To offset their future position, they must $183.00/cwt. What is the actual basis? What is the realized price for the producer? o Method 1: o Method 2: ○ The hedge resulted in a realized price of (buy/sell) June futures atEconomics Consider a firm in the DC that sells it output to a retailer in the FC. To hedge the FX risk the DC firm could (select all that are true): O Write a call option DC to FC at today's spot FX. O Exercise a call option DC to FC at today's spot rate O Purchase a fututes contract for DC to FC at today's spot rate. O Purchase a futures contract for FC to DC to offset lost sales O Write a put option for FC to DC at today's spot rate O Purchase a call option for FC to DC at today's spot rateIf you bought 100 shares of a call option on Tesla shares that had a 50 delta, what would be your first delta hedging transaction? (HINT: You bought a call, so the option makes money when Tesla stock goes which way? The delta hedge has to make money in the opposite direction) A. Buy a put for the same date B. Pray the price falls C. Buy 50 shares of Tesla Stock D. Sell 50 shares of Tesla Stock
- Economics Consider an investor based in the DC that invests in the FC. To hedge the FX risk the DC investor could (select all that are true) O Write a call option DC to FC at today's spot FX rate O Purchase a put option DC to FC at today's spot FX O Exercise a futures contract DC to FC at the date of the investment return trip O Engage in a swap for FC at the investment's open date to DC at the invesment's close date O Engage in a forward DC to FC, if counter-party risk is negligible O Purchase a futrues contract FC to DC for the return tripA Japanese MNC wants to lock in the cost of borrowing on a 9-month USD 45 million loan to be taken out in 3 months' time by using Eurodollar futures contracts. How many Eurodollar futures contracts in total will be sold by the Japanese MNC in order to hedge its cost of borrowing? a.135 b.1 c.145 d.9 e.None of the options in this question are correct.Question 4 (6 points): Hedge January 20th: Miller needs to buy wheat in late April. Currently, the May wheat futures are trading at $6.67. The expected basis is -$0.30. • Does the miller have a long or short cash position? • Does the miller have a long or short futures position? ⚫ To hedge: The miller will April 30th What is the expected price?. • The miller must. (buy/sell) May wheat futures at $6.67/bu. (buy/sell) wheat locally in the cash market at $7.89/bu. • To offset their future position, they must $8.04/bu. • What is the actual basis?. • What is the realized price for the producer? 。 Method 1: о Method 2: о The hedge resulted in a realized price of (buy/sell) May futures at
- 21. When a futures contract is settled, the traders are required to deposit funds in a margin account. The amount that must be deposited is known as ( ). A. initial margin B. maintenance margin C. variation marginConsider an investor based in the FC that invests in the DC. To hedge the FX risk the FC investor could (select all that are true): A. Engage in a swap for DC at the investment's open date to FC at the invesment's close date B. Engage in a forward DC to FC with an unnknown counter party and no escrow (margin) C. Write a call option FC to DC at today's spot FX rate D. Write a put option FC to DC at today's spot FX E. Exercise a futures contract DC to FC at the date of the investment return trip F. Purchase a futrues contract FC to DC for the return trip Detailed Explanation Please, Thank you!In what sense can you use commodity swaps to achieve the same goal as in signing commodity futures? Graph if helpful.
