[Romanus]

Transaction date: ( 4 months)
Transaction: “5060000/1.0677″ 4,739,159 PAY

Complete Futures deal: profit/loss
no of contractx x 125000(1.0659-1.0685)
” 12350/1.0677″ loss 11,567 PAY

TOTAL PAYMENT 4,750,726

Working:
No of contracts: “5060000/1.0659/125000) 37.9 =38

Estimation of Futures rate:
Now 4 Months 6month
Future:1.0659 1.0685 x

Spot: 1.0635 1.0677 x
Basis: 0.0024 0.0008 0

“2/6*.0024= 0.0008

[Romanus]

I recalculate the futures using the forward of 1.0677 as the spot rate and got an answer very close to the one given in the answer sheet. I did the following:
Transaction date: ( 4 months)
Transaction: “5060000/1.0677″ 4,739,159 PAY

Complete Futures deal: profit/loss
no of contractx x 125000(1.0659-1.0685)
” 12350/1.0677″ loss 11567 PAY

TOTAL PAYMENT 4,750,726

Working:
No of contracts: “5060000/1.0659/125000) 37.9 =38

Estimation of Futures rate:
Now 4 Months 6month
Future:1.0659 1.0685 x

Spot : 1.0635 1.0677 x
Basis: 0.0024 0.0008 0

“2/6*.0024= 0.0008
I ignored the over-hedged amount which was also ignored in the answer sheet.

[Romanus]

Thank you, I will recalculate using the forward rate given in as the spot rate on transaction date and see how close I get.

[Romanus]

Can you please take us through this problem using the same method we followed in the tutorials ?
Thank you.

Roma

[Romanus]

The Answer sheet talks about unhedged and overhedged amounts; we did not follow that approach in the Tutorial lessons? Could we ignore the unhedged and overhedged amounts and still come close?

[Romanus]

Hello Ren,

If you got the mock exams for P4 could you email them to me please?

rc.gibson19@hotmail.com

Romanus

[Author]

Posts