Use the following information to answer Questions 8-9: Suppose that the June 2023 Mexican peso futures contract has a current price of $0.05223/MXN and a contract size of MXN 500,000. A speculator believes that the spot price in June 2023 will be $0.05112/MXN. lator's
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- The Mexican peso futures contract is trading at 0.07713 $/MXN. Contract size for the Mexican peso future is 500,000 pesos. You believe the spot price will be 0.08365 $/MXN at expiration. What speculative position would you enter into to profit from your beliefs? Calculate your anticipated profits assuming you take a position in three contracts. What is the size of your profit or loss if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? Do problem 1 again assuming you believe the spot price will be 0.07061 $/MXN.A futures contract will mature in one time step. The current return over one time-step is R = 1.01 and the underlying asset of the future contract is currently worth $27 and has up factor u = 1.1 and down factor d = 0.9. The margin account for the short side of this futures contract currently holds $16. How much will the margin account hold when the futures contract matures if the underlying asset increases in value?6.Assume we have the following information: Spot price : 1146.00 Actual futures price : 1192.50 Theoretical futures price : 1160.00 Maturity : 3 months a. Is the futures fairly priced? Suppose an arbitrageur wish to take advantage of this opportunity. He has RM10,000,000.00 which he can fund at the current risk-free rate of 5%. b. What should he do? c. How many contracts should be shorted or bought? d. Assume that the arbitrageur maintains this position until contract expiry at which time futures and cash prices have converged to 1165. How much profit would he makes?
- Using the quotations in Exhibit 7.3, note that the September 2016 Mexican peso futures contract has a price of $0.05481 per MXN. You believe the spot price in September will be $0.064 per MXN. Calculate your anticipated profits (or loss) measured in $ (keep one decimal), assuming you take a long position in three contracts (Note that the contract size of one MXN contract is MXN500,000 ). When you enter a positive number, it means a profit. If you enter a negative number, it means a loss. Additionally, please keep one decimal, eg., 1,500.4. There is no need to use currency symbol in this question since your balance is measured in US $.A one-year gold futures contract is selling for $1,247. Spot gold prices are $1,200 and the one-year risk-free rate is 2%. a) According to spot-futures parity, what should be the futures price? b) What risk-free strategy can investors use to take advantage of the futures mispricing, and what would be the profits from that strategy?June 2021 Mexican peso futures contract has a price of $0.05194 per MXN. You believe the spot price in June will be $0.04525 per MXN. Required: a. What speculative position would you enter into to attempt to profit from your beliefs? b. Calculate your anticipated profits, assuming you take a position in three contracts. c. What is the size of your profit (loss) if the futures price is indeed an unbiased predictor of the future spot price and this price materializes? Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate your anticipated profits, assuming you take a position in three contracts. Note: Do not round intermediate calculations. Round your answer to the nearest whole number. Anticipated profit
- Imagine American Airlines (AA) is concerned about fuel prices rising in the minimize price risk, AA enters an agreement with a swap dealer in which it will pay the swap dealer a fixed payment of $85/bbl on July 15th 2024, in exchange for a variable payment from that swap dealer in the future which will be the August 2024 futures price on July 15th of 2024. Imagine that on July 15th of 2024, the futures price is equal to $75/bbl and the cash price is $75/bbl. In this case, what would be the net price the AA pays for crude oil in $/bbl? Ignore transaction fees. Enter your answer as a number to two decimal places. That is, if you believe the net price paid for crude oil is $21.12/bbl, enter "21.12" as your answer.A trader takes a view that March KLSE CI futures which are currently trading at 1188.60 are about to enter a downtrend. Should the trader go long or short futures. Assuming the trader maintains their original position until expiry and the cash settlement price is 1185.40, what will be the profit or loss? The contract size is RM50 per contract.A European call that will expire in one year is currently trading for $3. Assume the risk-free rate (based on continuous compounding) is 5%, the underlying stock price is $60 and the strike price is $55. a. Is there an arbitrage opportunity? b. Describe exactly what a trader should do to take advantage of the arbitrage opportunity assuming it exists. c. Determine the present value of the profit that the trader can earn assuming you identify an arbitrage opportunity. Use at least four decimal places for those questions that require a numerical answer.
- Paragraph Styles a) If your firm has a payment of 100 million euros due one year from now, how would you hedge the FX risk in this payment with 125 000 euros futures contracts? IConsider the following prices, volume and open interest for gold futures contracts. Contract size: 100 oz Price units: $/oz (a) What was the value of the contract that expires in February 2022 when the market closed? (b) Which futures contracts had a higher settle price on the previous trading day? (c) Would a speculator prefer to go short at the daily high price or the daily low price?Suppose the standard deviation of monthly changes in the price of a commodity is 0.4. The standard deviation of monthly changes in futures price for a contract on commodity B (similar to commodity A) is 0.5. The correlation between the futures and commodity price is 0.88. What is the hedge ratio and the optimal number of contracts if the commodity trader wants to hedge 10000 bushels and one contract is on 100bushels? Hedge ratio should be rounded off to three decimal places and optima number of contracts should be in whole numbers.