Problem 2.1.
Distinguish between the terms open interest and trading volume.

Problem 2.3.
Suppose that you enter into a short futures contract to sell July silver for $17.20 per ounce. The size of the contract is 5,000 ounces. The initial margin is $4,000, and the maintenance margin is $3,000. What change in the futures price will lead to a margin call? What happens if you do not meet the margin call?

Problem 5.2.
What is the difference between the forward price and the value of a forward contract?

Problem 5.3.
Suppose that you enter into a six-month forward contract on a non-dividend-paying stock when the stock price is $30 and the risk-free interest rate (with continuous compounding) is 12% per annum. What is the forward price?

Problem 5.4.
A stock index currently stands at 350. The risk-free interest rate is 8% per annum (with continuous compounding) and the dividend yield on the index is 4% per annum. What should the futures price for a four-month contract be?

Problem 5.9.
A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 and the risk-free rate of interest is 10% per annum with continuous compounding. a) What are the forward price and the initial value of the forward contract? b) Six months later, the price of the stock is $45 and the risk-free interest rate is still 10%. What are the forward price and the value of the forward contract?

Problem 5.12.
Suppose that the risk-free interest rate is 10% per annum with continuous compounding and that the dividend yield on a stock index is 4% per annum. The index is standing at 400, and the futures price for a contract deliverable in four months is 405. What arbitrage opportunities does this create?

Problem 5.14.
The two-month interest rates in Switzerland and the United States are 2% and 5% per annum, respectively, with continuous compounding. The spot price of the Swiss franc is $0.8000....

...To what extent does a currency forwardcontract need to play a formal role in multinational companies?
A globalisation has risen over the last 20 years. Because of this factor, international markets have increased rapidly, therefore a large number of companies have been particularly interested in global operatings, such as, export trade, import trade, overseas sales (Moosa, 2003). A subsequent significant...

...Franc is that 1.15 SF is equal to 1 US $, and the annual interest rate on fixed rate one-year deposits of SF is 1.5% and for US$ is 2.5%, what is nine-month forward rate for one dollar in terms of SFs? Assuming the same interest rates, what is the 18-month forward rate for one SF in US$s? Is this an indirect or a direct rate? If the forward rate is an accurate predictor of exchange rates, in this case will the SF get stronger or weaker against the...

...first non-US dollar denominated receivable:
1. Entering into a forwardcontract in which Dozier would sell forward British Pounds.
2. Execute a spot market transaction to create a synthetic forward hedge.
3. Do not hedge against any fluctuations between the Pound and the Dollar.
For the purpose of the analysis, there are several assumptions made which are pertinent to the analysis that follows (see appendix)....

...Commodity Forwards: with some focus on crude oil
6-1
Same concept applies…
• In general, commodity forward prices can be found using the same economic principles used for financial forward prices:
F0,T = S0 e
(r − δ )T
but the details will be different
6-2
Dirty details
• For financial assets, δ is the dividend yield • For commodities, δ is the commodity lease rate
The lease rate is the return that makes an investor...

...Write an essay on the forward Currency Exchange Market explaining in detail why such a market exists and how it operates; its dealers its buyers, the purposes for which the foreign currency is used. In your answer refer to the forward and futures market instruments explaining how the current exchange rates are affected by movements in these market prices. Use a website to collect information on the forward rate between the US $ and the Euro. Explain...

...
Forward, Futures, & Options
Heather L. Dirgo
BUS450: International Finance
Instructor Kristian Morales
September 29, 2014
Forward, Futures, & Options
Fundamentally, forward and futures abridge have the same function: each symbol of contracts allow people to buy or sell a particular type of asset at a particular time at a given price. However, it is in the specific details that these contracts differ....

...Distinguish between futures and forwardcontract
Futures contract
A futures contract is a contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts feature the quality and quantity of the underlying asset, they are standardized to facilitate trading on a futures exchange. Some...

...1 The three year zero rate is 7% per annum and the four year zero rate is 7.5% pa (both continuously compounded). What is the one year (continuously compounded) forward rate starting in three years’ time?
(2 marks)
With the formula with continuously compounded,
=
=0.09 =9%
The one year forward rate starting in three years’ time is 9%
1. The zero rate curve is flat at 6% pa with semi-annual compounding. What is the value of a FRA where the holder receives...