- October 22, 2015 at 5:37 am #278305
in doing future currency hedge buy at 19 contract at 96.60 and sell 19 dec contract at 96.671
how we got this ( 96.50 plus expected basis .171 )
as the current spot is 96 how we got this 96.50 i didnt drive to 96.671 pleas adviceOctober 22, 2015 at 8:14 am #278338
I am sorry, but I do not know what you mean by ‘question 63’ !
Please give me the name of the question.
(Have you watched the free lectures on interest rate risk management?)October 22, 2015 at 8:24 am #278344
this is kaplan kit
I watch lecture and i undstand hoe to caluclate basis and expected future rate and lock rate but in this question how we got this 96.671 ??? in the answer ( sell at 96.60 )October 22, 2015 at 4:21 pm #278428
I do not have the Kaplan kit!
If it is a past exam question then please tell me the name of the question and the date of the exam – then I will be able to find it and hopefully be able to help you.
(Have you watched our free lectures? (and the lecture on lock in rates))October 22, 2015 at 8:30 pm #278471
the name of question is interest rate hedge kaplan exam kit question number 63October 23, 2015 at 7:23 am #278498
Sorry, but I don’t have the Kaplan exam kit. If it is a past exam question then I can find it elsewhere, but otherwise I can’t help you.October 26, 2015 at 10:17 am #279000
question is past exam jun2005October 26, 2015 at 2:20 pm #279059
The current LIBOR equivalent price will be 96.00 (because LIBOR is 4%, so 100 – 4).
So the current basis is 0.60
The question says that LIBOR will fall by 0.5% (so to 3.5%) and therefore the equivalent futures price would be 96.50 (100 – 3.5).
You say that you are happy calculating that the basis will fall to 0.171, so the actual futures price at the date of the transaction will be 96.50 + 0.171 = 96.671
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