"Futures Contract" Essays and Research Papers

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Fi516 Homework Week 3

B = 9.4%+L-7.95% = L+1.45% Net Payment of A = 8.95% Net Payment of B = LIBOR+1.45% Problem based on Chapter 23 – Futures Contract What is the implied interest rate yield on a Treasury Bond ($100,000) futures contract that settled at 100’24 (or 100 24/32)? If interest rates increased by 0.75%, what would be the contract’s new value? Assume that this is based on 20 Years, with an annual yield of 8%...

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TCI and 3G

seats in the board 4. In the VW cases, hedge funds are exposed to 1. the unlimited lose on the downside of the option 2. potential short screeze situation 3. The total return swap the TCI and 3G enter into with the investment bank is the contract that mandates TCI and 3G pay a fix rate. In return, investment bank pay TCI and 3G a floating rate based on the performance of common stock of CSX. in order to hedge against the risk exposed to the fluctuation of the price of common share of CSX...

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Enron Case Study

practice requires that once a long-term contract was signed, the present value of net future cash flow is calculated and written as a full income although it is not fully earned. It inflated the financial earnings on the books. Such a sudden jump in one year’s report lead to a pressure on the employees because they were expected to come up with bigger numbers otherwise they might see the stock price spiral down. Adventurous and unreasonable projects/contracts continued. Despite potential pitfalls,...

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Basic Derivative Problems

the market index is $900. A 3-month forward contract on this index is priced at $930. The market index rises to $920 by the expiration date. The annual rate of interest on treasuries is 4.8% (0.4% per month). What is the difference in the profits between a long index investment and a long forward contract investment? (Assume monthly compounding.) A. $10.84 6. C. $32.50 gain The spot price of the market index is $900. A 3-month forward contract on this index is priced at $930. What is the...

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FIN516 W3 Homework Solutions

quality without being exposed to the increase in interest rates that occurred.) Problem 30-6 on Futures Contract Based on Chapter 30 (Excel file included) Your utility company will need to buy 100,000 barrels of oil in 10 days, and it is worried about fuel costs. Suppose you go long 100 oil futures contracts, each for 1,000 barrels of oil, at the current futures price of $60 per barrel. Suppose futures prices change each day as follows. a) What is the mark-to-market profit or loss (in...

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dog and cat

Other founders and their families also had substantial holdings. Mr. Lee, although well aware of the potential benefits of diversification, was unwilling to reduce his holdings in the company. He still felt extremely confident about the company’s future prospects and its ability to create new products, and he enjoyed the status and benefits associated with controlling the firm. But Mr. Lee was concerned about the risks to his personal wealth arising from foreign currency fluctuations. In some countries...

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Capital Market Reforms

mainstream of the financial system. • Poor disclosure in prospectus. Prospectus and balance sheet not made available to investors. • Investors faced problems of delays (refund, transfer, etc.) • Stock exchanges regulated through the Securities Contracts (Regulations) Act. No inspection of stock exchanges undertaken. • Stock Exchanges run as brokers clubs; management dominated by brokers. • Merchant bankers and other intermediaries unregulated. • No concept of capital adequacy. • Mutual funds—virtually...

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Williams Case

Specifically, what exposures should be actively managed? How much of these exposures should be covered, and for how long? 4) As instruments for risk management, what are the chief differences of foreign-exchange options and forward or future contracts? What are the advantages and disadvantages of each? Which, if either, of these types of instruments would be most appropriate for Tiffany to use if it chose ot manage its exchange-rate risk? 5) How should Tiffany organize itself to manage...

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fund investing. Topic 8: Futures Markets (BKM Ch.22 and notes) Futures versus Forward Futures Trading Trading Strategies Basis and Basis Risk Futures Pricing and Spot-Futures Parity Hedging with Futures Futures Price versus Expected Spot Price Discussion of trading Topic 9: Various Futures Contracts (BKM Ch.23 and Notes) 3    Interest Rate Parity Pricing on Stock Index Contracts and Index Arbitrage Other Futures Contracts (e.g., on Euro Dollar Futures, Commodities) Discussion on...

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Fall of Enron

fixed-price contracts with these customers. At the same time, they were able to manage this risk by entering into long-term fixed-rate contracts (forward or future contracts) with the wellhead suppliers. Enron then implemented their complex trading business model into other markets across the world that were characterized by the following: undergoing significant deregulation, complex distribution channels, dedicated to a single commodity, opaque prices, and loose supply/service contract standards...

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