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Exercise no I: The investor has a portfolio of assets worth USD 6000000 , of which 25% are treasury instruments and the rest are shares.
Exercise no I: The investor has a portfolio of assets worth USD 6000000 , of which 25% are treasury instruments and the rest are shares. The share part of the portfolio has a Beta coefficient of 1,35 . The investor decided to hedge this portfolio with index futures contracts based on the S\&P 500 index. The current rate for these futures contracts is 3850 points. a multiplier 20. Indicate the position (long or short) and the number of contracts that this investor should open to obtain a 65,0% hedge of their asset portfolio against price drops on the stock exchange. Exercise no II: How much should a forward contract cost in EUR/PLN currency with an expiry date of 90 days under the below mentioned data. Provide both for bid and offer forward prices. - Bid rate =4,5100EUR/PLN - spot price, sale offer - Offer rate =4,5125 EUR / PLN - spot price, bid - Credit rate for PLN per annum =1,40% - Deposit rate for PLN per annum =1,20% - Credit rate for EUR per annum =0,95% - Deposit rate for EUR on an annual basis =0,75% Remember about the base for currencies - (PLN - 365 \& EUR - 360). Exercise no III: Trader has opening a Long position in oat futures contract at 181 cents / bushel at the close of day 0 . The initial margin is USD 1600 while required margin is USD 1200. At the end of day 1 the futures contract is being closed at 177 cents/bushel. At the end of Day 2 the futures contract is being closed at 173cents/bushel. Please establish the value of margin at day 1 and day 2 and calculate variation margin (if needed) at day 1 and 2 . One tick for this oat futures contract equals 1 cents = USD 50. Determine the investor's result (total loss or profit) on this transaction (skip the commissions)
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