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alecto

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › alecto

  • This topic has 1 reply, 2 voices, and was last updated 6 months ago by John Moffat.
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    Posts
  • December 5, 2021 at 1:47 am #642529
    mehazia
    • Topics: 54
    • Replies: 6
    • ☆☆

    so the way by which you found the futures price when I followed,there are differences in the answer.
    If interest rates increase by 0.5% to 3.8%
    Exercise Price 96.00
    Futures Price 96.02
    whereas i am getting
    Exercise Price 96.00
    Futures Price 95.9
    this changes the answer wrt to exercising the option. in the 1st case it didnt have to be bt in the calculation of my answer i get it as exercise the same.
    my basis calculation went by;
    today 1st may 30 sept
    96.7 96.2 0
    96.16 95.9 0
    0.54 0.3 0
    2- in this answer they havent multiplied the no. of contracts by the size of the same why?
    i thought we had to do was 37*1000000*.0001(tick size)*25 euro (tick price)* gain r loss in futures or options /400.
    am i right or wrong?

    plz plz help me since I cant confuse myself with new steps other than what you have taught in the lectures at this moment.

    Also since I have the understanding of the same . will I get marks even if my calculations go wrong, like as in the above said cases.

    December 5, 2021 at 8:53 am #642570
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49606
    • ☆☆☆☆☆

    1. In your workings for the futures price, we are using June futures which expire in 6 months time (4 months + (1 May to 30 June)). Therefore the unexpired basis in 4 months time is 2/6 x 0.54 = 0.18.
    Therefore if interest rates increase to 3.8%, equivalent to 96.20, the futures price will be 96.20 – 0.18 = 96.02.

    2. You either use ticks or alternatively you take the movement in the futures price multiplied by the contract size and divide by 400. You do not do both at the same time!!! As I explain in my lectures, I prefer not to use ticks, but I do explain how ticks work if you prefer.

    The marks are not for the final answer but are for the workings. So even if you make mistakes, if it is clear that you basically understand how future etc. work then you will get more than enough marks to pass 🙂

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