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Ashan

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Active 10 years ago
  • Topics: 1
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  • October 21, 2014 at 9:03 pm #205323
    mysteryAshan
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    • Topics: 1
    • Replies: 3
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    Thanks John, that’s very helpful.. Appreciate it 🙂

    October 21, 2014 at 8:34 am #205205
    mysteryAshan
    Member
    • Topics: 1
    • Replies: 3
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    Will do John, thanks..

    Regarding this same question using the full way you mentioned that the results will be the same, this is what I came across John, could you please let me know whether this is correct:

    Payment of $5,060,000 in 4 months
    No. of contracts – 38
    Spot Rate – $1.0635 per CHF1
    125,000 Euros contract size (I assumed the tick value would be 0.01% or it should be)
    3 month expiry – 1.0647 ($ per CHF 1)
    6 month expiry – 1.0659 ($ per CHF 1)

    So this is what I did, the question does not mention about the 4 month futures rate so if I used the lock in rate as you mentioned it, it would be 1.0651.

    Therefore the gain or loss on the futures would be 38 x (125,000 x 0.01%) x Number of ticks
    Number of ticks would be = 1.0659 – 1.0651 = 0.0008
    So the loss on futures would be 38 x 12.5 x 8 = $3,800
    $5,060,000 -$3,800 = $5,056,200
    Due to the unavailability of the spot rate I used the 4 month futures rate to convert it –
    $5,056,200 / 1.0651 = CHF 4,747,160
    This result is CHF 3,568 less than what the examiner had achieved.
    Is this the correct methodology John?

    Thanks a bunch

    October 20, 2014 at 7:36 pm #205161
    mysteryAshan
    Member
    • Topics: 1
    • Replies: 3
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    Thanks John, will be looking forward to the lock-in-rate lecture or the written explanation 🙂

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