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A refinery has a contract to buy crude oil in January 15, 2018 and decides to use the futures market (NYMEX) in order to hedge
A refinery has a contract to buy crude oil in January 15, 2018 and decides to use the futures market (NYMEX) in order to hedge the risk associated with this purchase.
Which hedge will it open?
The futures price today for February 2018 is USD60/barrel. When the refinery conducts its business on January 15, 2018 the spot price is USD65/barrel and the February crude oil futures is trading for USD67/barrel.
Use a time table to describe the hedge and calculate the actual purchasing price/ barrel for the refinery.
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