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P4- JUNE 2011 – QUESTION 2
We have been told to apply various Hedging Techniques and relevant hedging techniques from the information given in exam are
1) Forward
2) Futures
3) OptionsI have doubts as under,
1) Future – $ to be received in 4 months time. Two futures one for 2 months expiry and one for 5 month expiry are given. I have followed all the instructions given in your lecture however could not understood how FUTURE CLOSURE PRICE IS ARRIVED AT in problem. Solved example from ACCA shows some calculation for Predicted Future Price, which was beyond my comprehension.
2) In case of Options – while deciding size of options for 1.3600 and 1.3800 – size is coming ( 117.64 & 115.94) And as You taught us we have rounded off to next decimal and taken 118 and 116 contracts. While ACCA solved examples has rounded off to earlier full digits as 117 & 115 respectively. What is the rule to be followed !Kindly guide me in the matter.
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