For each scenario in the table identify the position the hedger should take (long or short) identify the target price the hedger would expect to receive/pay for the hedged commodity calculate the hedge ratio used by the hedger calculate the effective net price received or paid for the asset at hedge liquidation determine the basis at the initiation and closing of futures position explain why the target price and the actual (effective net) price are different Round your results to four decimal places
Table for Problem 1 Commodity Spot Action Asset Size Contract Size Number of Contracts Used Historical Basis 48 sell sell $0.1160 $14.2100 47 9 buy buy 29 24 Sou WN Corn Gold Copper Gasoline Silver Soybeans Natural Gas Heating Oil Wheat Crude Oil Spot Price at Futures Price at Spot Price at Futures Price at Hedge Initiation Hedge Initiation Hedge Hedge Liquidation Liquidation $3.8000/bu $3.6725/bu $3.5300/bu $3.6700/bu $1,365.6000/oz $1,351.1000/oz $1,210.2000/oz $1,397 1000/oz $3.4775/16 $2.7915/1b $3.6775/15 $2.8715/16 $1.7584/gal $2.1259/gal $1.6711/gal $1.8686/gal $17.3050/oz $17.5150/oz $17.8350/oz $17.2850/oz $8.9200/bu $9.8575/bu $9.4475/bu $10.7000/bu $2.9120/mmBTU $2.8890/mmBTU $3.0720/mmBTU $2.9720/mmBTU $1.9034/bbl $2.0790/bbl $1.9324/bbi $2.1742/bbl $4.7325/bu $4.3900/bu $4.5000/bu $4.4375/bu $69.2300/bbl $72.1900/bb! $56.2000/bbl $62.3700/bb! 228,528bu 5,00obu 4,786oz 1000Z 260,7751b 25,ooolb 1,373,051gal 42,000gal 101,42402 5,000oz 186,894bu 5,00obu 177,915mmBTU 10,00ommBTU 44,999bbl 1,000bbl 210,654bu 5,000bu 49,00obbl 1,00obbl buy sell $0.7477 ($0.3491) ($0.2037) ($0.8719) $0.0239 ($0.1668) $0.3459 ($2.8416) 36 15 37 buy buy sell sell 47 10 50 Table for Problem 1 Commodity Spot Action Asset Size Contract Size Number of Contracts Used Historical Basis 48 sell sell $0.1160 $14.2100 47 9 buy buy 29 24 Sou WN Corn Gold Copper Gasoline Silver Soybeans Natural Gas Heating Oil Wheat Crude Oil Spot Price at Futures Price at Spot Price at Futures Price at Hedge Initiation Hedge Initiation Hedge Hedge Liquidation Liquidation $3.8000/bu $3.6725/bu $3.5300/bu $3.6700/bu $1,365.6000/oz $1,351.1000/oz $1,210.2000/oz $1,397 1000/oz $3.4775/16 $2.7915/1b $3.6775/15 $2.8715/16 $1.7584/gal $2.1259/gal $1.6711/gal $1.8686/gal $17.3050/oz $17.5150/oz $17.8350/oz $17.2850/oz $8.9200/bu $9.8575/bu $9.4475/bu $10.7000/bu $2.9120/mmBTU $2.8890/mmBTU $3.0720/mmBTU $2.9720/mmBTU $1.9034/bbl $2.0790/bbl $1.9324/bbi $2.1742/bbl $4.7325/bu $4.3900/bu $4.5000/bu $4.4375/bu $69.2300/bbl $72.1900/bb! $56.2000/bbl $62.3700/bb! 228,528bu 5,00obu 4,786oz 1000Z 260,7751b 25,ooolb 1,373,051gal 42,000gal 101,42402 5,000oz 186,894bu 5,00obu 177,915mmBTU 10,00ommBTU 44,999bbl 1,000bbl 210,654bu 5,000bu 49,00obbl 1,00obbl buy sell $0.7477 ($0.3491) ($0.2037) ($0.8719) $0.0239 ($0.1668) $0.3459 ($2.8416) 36 15 37 buy buy sell sell 47 10 50
