- This topic has 1 reply, 2 voices, and was last updated 1 year ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › 36. Daikon (june 2015) bpp kit
hello
the question asks to advise on the hedging method to be used.
although i do understand how to calculate the price of the future (on the transaction date) based on basis, therefore the expected futures price after 5 months will be 4.56%
however, when hedging through options, it uses expected futures price of 4.56% same as above. but should it not calculate expected future price based on new strike price under option of 95.50?
The options are options to buy or sell futures at a fixed price (the option exercise price). The price of the futures on the date the options can be exercised is not affected.
Have you watched my free lectures on interest rate options?