Hi John, thanks for the Lectures they are really a great help.
I am having trouble estimating the futures price based on interpolation between 2 Futures prices, when a transaction occurs before the expiry of the relevant futures contract. My query is specific to the apportionment of the duration as in Q1b (ii) Lirio Co. March/June 2016 and Q1a CMC Co. June 2014.
Please ask this in the Ask the Tutor Forum, and not as a comment on a lecture.
(There are lectures working through the whole of the question CMC. You can find them by following the link to ‘Revision Kit Live’ from the main P4 page.)
Referring to example 13 in this chapter, would like to know each contract is 拢62,500 (in pounds), but when we calculate the profit per ticks, we times 拢62,500 by 0.0001, the result is in dollar $6.25?
The profit (or loss) is the difference between the $ values per the pound. If the rate changes from 1.5000 to 1.5001 $’s per Pound, then the profit is 0.0001 $’s for every pound.
There are no extra techniques involved – the problem is more one of approach. For that reason I have uploaded a few lectures working through some past question 1’s from the exam, where I discuss the approach as well as obviously working through the technical content. They are linked from here: https://opentuition.com/acca/p4/acca-p4-revision/
Settlement. (Although it is unlikely that you will be given two prices again in the exam. It happened on one question set by the previous examiner, but he is no longer the examiner)
Dear Sir, Thank you very much. I was confused a lot on this topic in the past. The lectures are really easy to follow and help us understand the topic of derivatives quickly.
At the end of the lecture it state that future is only suitable for large amount hedging, since there is no point gambling 62,500 pound which is larger than the hedge. I was wondering the contract currency of 62,500 pound is it the deposit to make a deal in futures?
Dealing in a future of 62,500 means you are at risk on 62,500. The object is to ‘cancel out’ the risk on the transaction itself. So if the transaction was (say) only 5,000 then dealing in a future would be increasing the amount at risk!
The deposit/margin doesn’t itself affect the risk at all. The amount required is up to the dealer to decide, but is likely to be around 30%.
After your examples and work through i got a confident, that was until i attempted to do Q2 of June 2011, the whole exchange rates got me confused again. Any comment/tricks on this particular questions, how i should go about it in the exam, if presented in such a way like this
Sir,
For currency future, if the question doesn’t tell the spot rate on the closing date, how are we going to find such spot rate? Thank you.
We can’t and we don’t – we then calculate the lock-in rate instead.
Hi John, thanks for the Lectures they are really a great help.
I am having trouble estimating the futures price based on interpolation between 2 Futures prices, when a transaction occurs before the expiry of the relevant futures contract. My query is specific to the apportionment of the duration as in Q1b (ii) Lirio Co. March/June 2016 and Q1a CMC Co. June 2014.
Thanks for what you can tell me.
Please ask this in the Ask the Tutor Forum, and not as a comment on a lecture.
(There are lectures working through the whole of the question CMC. You can find them by following the link to ‘Revision Kit Live’ from the main P4 page.)
Dear Sirs,
Referring to example 13 in this chapter,
would like to know each contract is 拢62,500 (in pounds), but when we calculate the profit per ticks, we times 拢62,500 by 0.0001, the result is in dollar $6.25?
Here we assume $/拢 is1:1?
Please advise.
Thanks,
Candy
The profit (or loss) is the difference between the $ values per the pound. If the rate changes from 1.5000 to 1.5001 $’s per Pound, then the profit is 0.0001 $’s for every pound.
Thanks John!
You are welcome 馃檪
Many thanks for these lectures, they are very clear as well as very useful when studying for the exam. Thanks you !
Thank you for the comment 馃檪
thanks for the lecture on foreign exchange . Can you please also make lectures for merger and acquisition
There are no extra techniques involved – the problem is more one of approach. For that reason I have uploaded a few lectures working through some past question 1’s from the exam, where I discuss the approach as well as obviously working through the technical content.
They are linked from here:
https://opentuition.com/acca/p4/acca-p4-revision/
Dear sir,
I have a little question: if we have two prices (open and settlement) which of them we should use in estimating future price?
Thank you.
Settlement.
(Although it is unlikely that you will be given two prices again in the exam. It happened on one question set by the previous examiner, but he is no longer the examiner)
Thank you very much for the very clear explanation of foreign currency risk management. Very much appreciated.
Thank you for the comment 馃檪
Dear Sir,
can u explain the concept of tick size in detail.. I m really struggling in that.. :/
It is explained in detail in the lecture – at about 04:40.
Dear Sir,
Thank you very much.
I was confused a lot on this topic in the past. The lectures are really easy to follow and help us understand the topic of derivatives quickly.
Thank you for the comment 馃檪
Hi Sir,
At the end of the lecture it state that future is only suitable for large amount hedging, since there is no point gambling 62,500 pound which is larger than the hedge. I was wondering the contract currency of 62,500 pound is it the deposit to make a deal in futures?
Dealing in a future of 62,500 means you are at risk on 62,500. The object is to ‘cancel out’ the risk on the transaction itself. So if the transaction was (say) only 5,000 then dealing in a future would be increasing the amount at risk!
The deposit/margin doesn’t itself affect the risk at all. The amount required is up to the dealer to decide, but is likely to be around 30%.
Hi John
After your examples and work through i got a confident, that was until i attempted to do Q2 of June 2011, the whole exchange rates got me confused again. Any comment/tricks on this particular questions, how i should go about it in the exam, if presented in such a way like this
Where can i find the rest of the lectures for P4? The site only shows lectures from chapter 7-19? I need the rest as I studying it myself. Thanks
There are no more lectures – the other topics are covered in the Course Notes, but not in lectures.
Very Nice.Lecture. God bless me. Kindly explain if we are given 2 futures rates ( as was given in recent exam)
Open Rate
Settlement Date
You told us to take Open Rate for buying future and Settlement Date for selling future. Have I understood it correctly ! Kindly comment.
very useful addition to the previous lectures
comprehensive. thanks to tutor and OT
how come only can watch half way for these few vedio??
anyone can help??
thanks…