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Derivatives question regarding futures and forwards attached. The spot price of oil is $27.90 per barrel. Light Crude Oil (NYMEX) (Price quotes for NYMEX Light
Derivatives question regarding futures and forwards attached.
The spot price of oil is $27.90 per barrel. Light Crude Oil (NYMEX) (Price quotes for NYMEX Light Crude Oil delayed at least 10 minutes as per exchange requirements) Current Session Month Click for chart Open High Low Last Mar'16 30.17 30.61 27.74 28.22 Apr'16 32.04 32.48 29.57 30.01 May'16 33.67 34.20 31.28 31.66 Jun'16 35.09 35.59 32.65 32.96 Jul'16 36.06 36.63 33.71 33.97 Aug'16 37.10 37.49 34.56 34.79 Time 14:47 9-Feb 14:47 9-Feb 14:47 9-Feb 14:47 9-Feb 14:47 9-Feb 14:47 9-Feb Prior.Day Set Chg Vol Set Op Int 27.94 -1.75 616184 29.69 428564 29.74 -1.90 283901 31.64 290505 31.41 -2.02 128001 33.43 171831 32.74 -2.18 101965 34.92 172700 33.77 -2.34 42382 36.11 71184 34.58 -2.45 20575 37.03 53799 (a) What are the futures prices (settlement) for March, June and August 2016 delivery of crude oil? (b) Would the August 2016 price be expected to be higher or lower than March's price? Explain the quotes that are observed. (c) Using a cost-of-carry model, estimate the implied storage cost (using a continuously compounded rate) for the August 2016 crude oil contract. Use a risk-free rate of 0.37% continuously compounded per year, and assume that expiration is at the end of the month. Is there an arbitrage opportunity? Explain. (d) Explain the difference between volume (Vol) and open interest (Op Int)Step by Step Solution
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