revision live: Q1 june 14 (part 1)

NnumeraSupporter9y ago

hi sir i didnt get the part where you calculated the basis change 24-8 and then figure of the change in basis came as 0.0016. because the way ive been practicing was the how you did in the lectures- where we calculate the basis for the number of months the transaction is due in , and the future price is the balance between the basis and the spot rate. could you please explain the above thanks. also another question , this may be stupid to ask, but is the lock in rate the actual future rate when the transaction will take place? thanks alot

John MoffatTutor9y ago#1

We do not know what the spot rate will be in 4 months time, so we need to calculate the lock-in rate. The lock-in rate is not an actual future price, it is a rate that gives the net effect of converting the transaction at spot, together with the profit or loss on the futures. I explain it in full in my lectures on the lock-in rate.

NnumeraSupporter9y ago#2

thank you sir

John MoffatTutor9y ago#3

You are welcome :-)

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