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1. Determine the percentage change in the currencys value over the period studied. 1a. Determine the percentage change in the futures contract over the period.
1. Determine the percentage change in the currencys value over the period studied.
1a. Determine the percentage change in the futures contract over the period. Compare these two numbers.
DC1 and DC2 are the two period during which currency studies.
DC1.
1. Currency to hedge | Canadian Dollar | ||
1a Currency pair formed with the US dollar (as seen in OANDA, FXCM) | USD/CAD | ||
1b Date when hedge (trading) will be closed and all the calculations done | Friday, February 17, 2017 | ||
1c Is this a direct quote in the spot market? (Y/N) | N | ||
2. Exchange rate of the currency as typically quoted in FX markets. Use the SPOT price from the Investing.com site | BID | ASK | |
1.3022 | 1.3024 | ||
2a Express the price as a direct quote (value of one unit of that currency in dollars) | 0.7678133 | 0.7679312 | |
3. Three or six-month future rate as of this date (use whatever period covers the second data collection period) Report the settlment price reported on the CME Group website | 0.76815 | ||
Expiration month of future contract | MAR 17 | ||
. Specify the size of the future (option) contracts | 100000 | ||
4. Forward points observed on this date. Use the Investing.com website for information. Select data for 1W. Students doing USDJPY must use an appropriate factor to convert pips. | BID | ASK | |
-1.49 | -1.21 | ||
Horizon for Fwd quotes | 2 weeks | ||
5. Use the CME group website to obtain option price data. | MAR 17 | ||
Specify the expiration month on the CME options that will cover the period you are interested in hedging | |||
Strike | Premium | ||
5a. Choose a call option that is in the money and obtain its premium | 7600 | 1.18 | |
5b. Find the call option that is at the money and obtain its premium | 7700 | 0.59 | |
5c. Choose a call option that is out the money and obtain its premium | 7800 | 0.24 | |
6. Use the CME group website to obtain put option price data. | |||
Use the same expiration month you chose for call options | Strike | Premium | |
6a. Choose a put option that is in the money and obtain its premium | 7800 | 1.42 | |
6b. Find the put option that is at the money and obtain its premium | 7700 | 0.77 | |
6c. Choose a put option that is out the money and obtain its premium | 7600 | 0.37 | |
7. Use the Global Rates website to identify the LIBOR rates | LIBOR rates | ||
USD rate for the horizon selected | 0.77556 % | ||
Foreign currency rate for the horizon selected | 0.96000% |
DC2
1. Name of the currency to hedge | Canadian Dollar | ||
1a Name of the currency pair formed against the US dollar (OANDA, FXCM) (OANDA, FXCM) (OANDA, FXCM) | USD/CAD | ||
1b Is this a direct quote in the spot market? (Y/N) | N | ||
2. Exchange rate of the currency as typically quoted in FX markets | BID | ASK | |
Use the last quote of that day/week. | 1.3094 | 1.3096 | |
2a Express the price as a direct quote (value of one unit of that currency in dollars) | 0.763592 | 0.763709 | |
3. Price of the futures contract from the CME Group website | 0.76325 | ||
Expiration month of future contract | MAR 17 | ||
4. Use the CME group website to obtain call option price data. | MAR 17 | ||
This is the expiration month that you are using for the options | |||
Strike | Premium | ||
4a. Obtain the premium for the call option with this strike price | 7600 | 0.63 | |
4b. Obtain the premium for the call option with this strike price | 7700 | 0.19 | |
4c. Obtain the premium for the call option with this strike price | 7800 | 0.04 | |
5. Use the CME group website to obtain put option price data. | |||
Strike | Premium | ||
5a. Obtain the premium for the put option with this strike price | 7800 | 1.71 | |
5b. Obtain the premium for the put option with this strike price | 7700 | 0.86 | |
5c. Obtain the premium for the put option with this strike price | 7600 | 0.31 |
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