Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Keshi Co December 2014
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- May 26, 2016 at 11:24 pm #317371AnonymousInactive
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In this question they did not tell you if the basis is positive or negative(unless it does and i didn’t see or understand the statement). but the basis is 22 my question is how do you know to take it away from the Libor as in this question, but is it always like that is the basis always negative? (I dont remember if ive done a question where the basis is added to the Libor to get the future).
Thank you
May 27, 2016 at 8:05 am #317421The futures price and LIBOR will move closer together over time.
So if the futures price is currently higher then it will always be higher.
If it is currently lower then it will always be lower.May 27, 2016 at 2:10 pm #317501AnonymousInactive- Topics: 43
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Perfect so it can go either way, so how do we know in the Keshi question that Future is lower then spot, all they gave us is the basis differences?
May 27, 2016 at 5:11 pm #317543It was a bit naughty of the examiner to assume one way without giving any information about it in the question. As a result he would have had to give full marks whether you added or subtracted.
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