Question
a) An investor would like to hedge a long position in US Treasury bonds. What would be your suggestion and why? b) Suppose that, at
a) An investor would like to hedge a long position in US Treasury bonds. What would be your suggestion and why?
b) Suppose that, at the opening of the International Monetary Market (IMM) on 1 December 2018 (today), you went long on two March futures contracts for Brazilian Real (BRL). The agreed upon price was 0.27USD/1BRL for a BRL100,000 contract. At the close of trading today, the futures price has dropped to 0.26USD/1BRL, but you decide to keep your long position open.
Describe and briefly explain all the cash flows that you paid or received today, assuming that there are no brokerage fees to buy or sell the contracts. Suppose the initial margin is $8000 and the maintenance margin is $5000 per contract.
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