Business, 22.02.2021 19:30 alexisolsennn4680

A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contracts on another related asset. Each futures contract is on 5,000 units of the related asset. The spot price of the asset that is owned is $24 and the standard deviation of the change in this price over the life of the hedge is estimated to be $0.24. The futures price of the related asset is $36 and the standard deviation of the change in this over the life of the hedge is $0.22. The coefficient of correlation between the spot price change and futures price change is 0.73. Required:
a. What is the minimum variance hedge ratio?
b. Should the hedger take a long or short futures position?
c. What is the optimal number of futures contracts with no tailing of the hedge?
d. What is the optimal number of futures contracts with tailing of the hedge?

Answers: 1

Show answers

Another question on Business

Business, 22.06.2019 11:20

Which stage of group development involves members introducing themselves to each other?

Answers: 3

Answer

Business, 22.06.2019 13:20

In order to be thoughtful about the implementation of security policies and controls, leaders must balance the need to reduce with the impact to the business operations. doing so could mean phasing security controls in over time or be as simple as aligning security implementation with the business’s training events.

Answers: 3

Answer

Business, 22.06.2019 19:50

The interaction of individual choices because a type of fish is on the verge of extinction, the government imposes rules that prohibit fishing in the publicly owned spawning grounds. at first owners of fshing bouts complain about this restriction on where they can fish, but soon they notice that the number of adult fish swimming outside the protected area is much higher than it was before. with the restriction, each fishing boat ends up catching more fish than it did before the r which of the following principles of economic interaction best describes this scenario? o there is a tradeoff between equality and efficiency o markets usually lead to efficiency. o when markets do not achieve efficiency,government intervention can improve overall welfare o markets allocate goodseffectively

Answers: 1

Answer

Business, 23.06.2019 00:30

Kim davis is in the 40 percent personal tax bracket. she is considering investing in hca(taxable) bonds that carry a 12 percent interest rate. what is her after- tax yield(interest rate) on the bonds?

Answers: 1

Answer

You know the right answer?

A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with...

Questions

Business, 21.01.2021 22:00

Suppose a country's real GDP is $14 trillion and the population is 200 million. Instructions: Enter your answers as a whole number. a. What is this co...