Futures and Options

2. You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, September 11th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, September 8th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.

1. Describe the position you decide to enter (long or short).

2. Describe the contract (what month, and what quantity).

3. Document the gain or loss due to marking to market every day that your position is open.

4. What is the total cost in US$ after you have closed out your futures positions, and made your payment?

5. What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?

6. Repeat steps a) e) assuming that you expect a payment of 900,000 British pounds on close of business day, Friday, September 11th. Assume you that you enter into the futures position at a close of day on Tuesday, September 8th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 62,500 British pounds.

Japanese Yen Data

Daily Settlements for Japanese Yen Future (FINAL)Trade Date: Wednesday, 09/09/2020

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
SEP 20	94380	94535	94100	94180	-145	94160	145,486	123,315
OCT 20	94425	94595	94160A	94240B	-145	94210	182	395
NOV 20	94460	94615	94185	94270B	-140	94245	94	407
DEC 20	94525	94650	94210	94305A	-140	94280	84,797	26,967
JAN 21	-	-	-	-	-140	94345	0	0
MAR 21	-	94800B	94425A	94485B	-140	94465	0	369

Daily Settlements for Japanese Yen Futures (FINAL)Trade Date: Friday, 09/11/2020

Month	Open	High	Low	Last	Change	Settle	Estimated Volume	Prior Day Open Interest
SEP 20	94215	94295	94095	94200	+5	94240	33,134	36,168
OCT 20	94250	94330B	94160A	94260A	+5	94290	275	284
NOV 20	94330	94370	94195A	94295A	+5	94320	18	319
DEC 20	94310	94405	94215	94305	+5	94355	73,035	115,717
JAN 21	-	-	-	-	+10	94420	0	0
MAR 21	-	94540B	94470A	94540B	+10	94540	2	369

Spot data:

Jul.Day	YYYY/MM/DD	Wdy	USD/JPY
2459101	2020/09/08	Tue	0.0094383
2459102	2020/09/09	Wed	0.0094132
2459103	2020/09/10	Thu	0.0094211
2459104	2020/09/11	Fri	0.0094191