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CMC Co June 14

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › CMC Co June 14

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 21, 2024 at 2:58 pm #705790
    bear123
    Participant
    • Topics: 6
    • Replies: 6
    • ☆

    I have one doubt regarding in exam kit solution.

    Using currency futures we use the number of contracts which is 38.

    but when using the currency options we use the contracts 37 and the rest is hedged by using forward rate.

    Why no under hedging was done for currency futures? it was overhedged

    May 21, 2024 at 3:32 pm #705792
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54674
    • ☆☆☆☆☆

    In the exam it does not matter which way you round when calculating the number of contracts – you still get the marks. (I always round to the nearest in both cases 🙂 )

    May 21, 2024 at 3:52 pm #705793
    bear123
    Participant
    • Topics: 6
    • Replies: 6
    • ☆

    Got it, sir I have silly doubt I guess, but when we overhedged in currency options we deducted the amount CHF21073 as it was extra I suppose. but for currency futures we did not deduct anything regarding overhedging

    May 22, 2024 at 8:11 am #705815
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54674
    • ☆☆☆☆☆

    I agree it is inconsistent in the answer. It would have made sense to have at least mentioned the over hedge when dealing with the futures.

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