I have the below 5 questions in need of responses. I am willing to pay a generous wage provided it is done correctly.

Question 1

Use the following futures quotes taken from NYMEX.

The spot price of oil is $52.54 per barrel.

Light Crude Oil (NYMEX)

(Price quotes for NYMEX Light Crude Oil delayed at least 10 minutes as per exchange requirements)

Month Click for chart	Current Session	Prior.Day
Open	High	Low	Last	Time	Set	Chg	Vol	Set	Op Int
Mar'17	53.15	53.46	52.41	52.61	16:57	52.63	-0.54	465605	53.17	582198
30-Jan
Apr'17	53.68	53.99	53.01	53.23	16:57	53.24	-0.51	139143	53.75	176560
30-Jan
May'17	54.21	54.47	53.54	53.78	16:57	53.78	-0.47	66084	54.25	174097
30-Jan
Jun'17	54.62	54.87	54.00	54.24	16:57	54.24	-0.43	66268	54.67	264597
30-Jan
Jul'17	54.85	55.14	54.35	54.62	16:57	54.57	-0.40	16443	54.97	80608
30-Jan
Aug'17	55.04	55.29	54.56	54.83	16:57	54.78	-0.37	8538	55.15	65133
9-Feb

What are the futures prices (settlement) for March, June and August 2017 delivery of crude oil?

Would the August 2017 price be expected to be higher or lower than Marchs price? Explain the quotes that are observed.

Using a cost-of-carry model, estimate the implied storage cost (using a continuously compounded rate) for the August 2017 crude oil contract. Use a risk-free rate of 0.52% continuously compounded per year, and assume that expiration is at the end of the month. Is there an arbitrage opportunity? Explain.

Explain the difference between volume (Vol) and open interest (Op Int).

Use the following settlement data obtained from the CME site for Questions 2 and 3.

Question 2

Japanese Yen Futures Settlements

Spot price = 113.74 Yen/$

Note that the quotes are in $/Yen multiplied by 10,000,000.

One contract is for 12.5 million Yen.

JY CME JAPANESE YEN FUTURES

SETTLEMENT PRICES AS OF 01/30/17 03:20 PM (CST)

MTH/ ------------- DAILY -------------------- PT ----- PRIOR DAY ------

STRIKE OPEN HIGH LOW LAST SETT CHGE EST.VOL SETT VOL INT

MAR17 87165 88255 87100 88155 88080 +1040 149867 87040 136815 190361

JUN17 87720 88655B 87545A 88570B 88495 +1030 1005 87465 508 8863

SEP17 88275 89065B 88090A 88985B 88940 +1010 7 87930 57

DEC17 ---- 89500B ---- 89420A 89425 +1010 88415 22

MAR18 ---- 90010B ---- 89960A 89975 +1010 88965 39

JUN18 ---- 90335B ---- 90335B 90555 +1015 89540 11

SEP18 ---- ---- ---- ---- 91145 +1020 90125

DEC18 ---- ---- ---- ---- 91740 +1020 90720

MAR19 ---- ---- ---- ---- 92395 +1030 91365

JUN19 ---- ---- ---- ---- 93105 +1040 92065

SEP19 ---- ---- ---- ---- 93825 +1050 92775

DEC19 ---- ---- ---- ---- 94560 +1065 93495

MAR20 ---- ---- ---- ---- 95305 +1080 94225

JUN20 ---- ---- ---- ---- 96060 +1090 94970

SEP20 ---- ---- ---- ---- 96830 +1105 95725

DEC20 ---- ---- ---- ---- 97610 +1115 96495

MAR21 ---- ---- ---- ---- 98405 +1130 97275

JUN21 ---- ---- ---- ---- 99210 +1140 98070

SEP21 ---- ---- ---- ---- 100030 +1155 98875

DEC21 ---- ---- ---- ---- 100865 +1170 99695

TOTAL EST.VOL VOLUME OPEN INT

TOTAL 150879 137323 199353

Suppose you are an importer of toys from Japan. You expect to import Yen 100,000,000 worth of toys in June 2017. How many contracts of the June Yen/$ futures should be purchased to completely hedge your Yen exposure?

On the day of the June 2017 futures expiration, the spot exchange rate is 110Yen/$. What is the profit/loss on the futures position?

What is the 7-month Japanese risk-free rate implied by the SEP17 futures settlement price? Assume that the 7-month risk free rate in the US is 0.56% per annum (continuously compounded).

Question 3

S&P 500 Futures Settlements

The spot index value = 2,280.90

SP CME S&P 500 FUTURES

SETTLEMENT PRICES AS OF 01/30/17 06:00 PM (CST)

MTH/ ------------- DAILY ----------------------- PT ----- PRIOR DAY --

STRIKE OPEN HIGH LOW LAST SETT CHGE EST.VOL SETT VOL INT

MAR17 2283.10 2285.30B 2264.00 2275.80 2276.00 -13.10 1798 2289.10 4146 64465

JUN17 2273.30 2273.30 2259.00A 2270.00B 2270.90 -13.10 16 2284.00 485 1764

SEP17 ---- ---- 2254.70A 2265.70B 2266.60 -13.10 2279.70 22

DEC17 ---- ---- 2251.20A 2262.20B 2263.10 -13.10 2276.20

MAR18 ---- ---- 2257.10A 2268.10B 2269.00 -13.10 2282.10

JUN18 ---- ---- 2263.00A 2274.00B 2274.90 -13.10 2288.00

SEP18 ---- ---- 2268.90A 2279.90B 2280.80 -13.10 2293.90

DEC18 ---- ---- 2258.00A 2269.00B 2269.90 -13.10 2283.00

DEC19 ---- ---- 2281.10A 2292.10B 2293.00 -13.10 2306.10

DEC20 ---- ---- ---- ---- 2316.10 -13.10 2329.20

DEC21 ---- ---- ---- ---- 2339.20 -13.10 2352.30

TOTAL EST.VOL VOLUME OPEN INT

TOTAL 1814 6304 66241

Calculate the theoretical price for the S&P500 index futures maturing in December 2017. Assume that the dividend yield on the index is 1.5% per year continuously compounded. Use the above quotes to determine whether there is an arbitrage opportunity. If there is an opportunity, show how the arbitrage would be made, using a payoff table. Assume that the futures contract expires at the end of the month, and use a T-bill rate of 0.70% per year continuously compounded. What are the potential problems with the arbitrage?

Question 4

A fund manager has a portfolio worth $50 million with a beta of 0.92. The manager is concerned about the performance of the market over the next 4 months and plans to use 5-month futures contracts on the S&P 500 to hedge the risk. The current level of the index is 2,280, one contract is on 250 times the index, the risk-free rate is 0.75% per annum, and the dividend yield on the index is 1.5% per annum. The current 5-month futures price is 2,270.

What position should the fund manager take to eliminate all exposure to the market over the next four months?

Calculate the effect of your strategy on the fund managers returns if the level of the market in four months is 2,100, 2,200, 2,300, and 2,400. Assume that the one-month futures price is 0.20% lower than the index level at this time.

Question 5

A five-year bond with a yield of 10% (continuously compounded) pays a 7% coupon at the end of each year.

What is the bonds price?

What is the bonds duration?

Use the duration to calculate the effect on the bonds price of a 0.2% decrease in its yield.

Recalculate the bonds price on the basis of a 9.8% per annum yield and verify that the result is in agreement with your answer to (c).

Question 1 Use the following futures quotes taken from NYMEX. The spot price of oil is $52.54 per barrel. Light Crude Oil (NYMEX) (Price quotes for NYMEX Light Crude Oil delayed at least 10 minutes as per exchange requirements) Current Session Month Click for chart Open High Low Last Mar'17 53.15 53.46 52.41 52.61 Apr'17 53.68 53.99 53.01 53.23 May'17 54.21 54.47 53.54 53.78 Jun'17 54.62 54.87 54.00 54.24 Jul'17 54.85 55.14 54.35 54.62 Aug'17 55.04 55.29 54.56 54.83 Time 16:57 30-Jan 16:57 30-Jan 16:57 30-Jan 16:57 30-Jan 16:57 30-Jan 16:57 9-Feb Prior.Day Set Chg Vol Set Op Int 52.63 -0.54 465605 53.17 582198 53.24 -0.51 139143 53.75 176560 53.78 -0.47 66084 54.25 174097 54.24 -0.43 66268 54.67 264597 54.57 -0.40 16443 54.97 80608 54.78 -0.37 8538 55.15 65133 (a) What are the futures prices (settlement) for March, June and August 2017 delivery of crude oil? (b) Would the August 2017 price be expected to be higher or lower than March's price? Explain the quotes that are observed. (c) Using a cost-of-carry model, estimate the implied storage cost (using a continuously compounded rate) for the August 2017 crude oil contract. Use a risk-free rate of 0.52% continuously compounded per year, and assume that expiration is at the end of the month. Is there an arbitrage opportunity? Explain. (d) Explain the difference between volume (Vol) and open interest (Op Int). Use the following settlement data obtained from the CME site for Questions 2 and 3. Question 2 Japanese Yen Futures Settlements Spot price = 113.74 Yen/$ Note that the quotes are in $/Yen multiplied by 10,000,000. One contract is for 12.5 million Yen. JY CME JAPANESE YEN FUTURES SETTLEMENT PRICES AS OF 01/30/17 03:20 PM (CST) MTH/ STRIKE MAR17 JUN17 SEP17 DEC17 MAR18 JUN18 SEP18 DEC18 MAR19 JUN19 SEP19 DEC19 MAR20 JUN20 SEP20 DEC20 MAR21 JUN21 SEP21 DEC21 TOTAL TOTAL ------------- DAILY -------------------OPEN HIGH LOW LAST SETT 87165 87720 88275 ---------------------------------------------------- 88255 88655B 89065B 89500B 90010B 90335B ------------------------------------------- 87100 87545A 88090A ---------------------------------------------------- 88155 88570B 88985B 89420A 89960A 90335B ------------------------------------------- 88080 88495 88940 89425 89975 90555 91145 91740 92395 93105 93825 94560 95305 96060 96830 97610 98405 99210 100030 100865 PT CHGE +1040 +1030 +1010 +1010 +1010 +1015 +1020 +1020 +1030 +1040 +1050 +1065 +1080 +1090 +1105 +1115 +1130 +1140 +1155 +1170 EST.VOL 149867 1005 7 EST.VOL 150879 ----SETT 87040 87465 87930 88415 88965 89540 90125 90720 91365 92065 92775 93495 94225 94970 95725 96495 97275 98070 98875 99695 PRIOR DAY VOL -----INT 136815 508 190361 8863 57 22 39 11 VOLUME 137323 OPEN INT 199353 (a) Suppose you are an importer of toys from Japan. You expect to import Yen 100,000,000 worth of toys in June 2017. How many contracts of the June Yen/$ futures should be purchased to completely hedge your Yen exposure? (b) On the day of the June 2017 futures expiration, the spot exchange rate is 110Yen/$. What is the profit/loss on the futures position? (c) What is the 7-month Japanese risk-free rate implied by the SEP17 futures settlement price? Assume that the 7-month risk free rate in the US is 0.56% per annum (continuously compounded). Question 3 S&P 500 Futures Settlements The spot index value = 2,280.90 SP CME S&P 500 FUTURES SETTLEMENT PRICES AS OF 01/30/17 06:00 PM (CST) MTH/ STRIKE MAR17 JUN17 SEP17 DEC17 MAR18 JUN18 SEP18 DEC18 DEC19 DEC20 DEC21 TOTAL TOTAL ------------- DAILY ----------------------OPEN HIGH LOW LAST SETT 2283.10 2273.30 ---------------------------- 2285.30B 2273.30 ---------------------------- 2264.00 2259.00A 2254.70A 2251.20A 2257.10A 2263.00A 2268.90A 2258.00A 2281.10A ------- 2275.80 2270.00B 2265.70B 2262.20B 2268.10B 2274.00B 2279.90B 2269.00B 2292.10B ------- 2276.00 2270.90 2266.60 2263.10 2269.00 2274.90 2280.80 2269.90 2293.00 2316.10 2339.20 PT CHGE -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 -13.10 EST.VOL 1798 16 EST.VOL 1814 ----SETT 2289.10 2284.00 2279.70 2276.20 2282.10 2288.00 2293.90 2283.00 2306.10 2329.20 2352.30 PRIOR DAY -VOL INT 4146 485 VOLUME 6304 64465 1764 22 OPEN INT 66241 (a) Calculate the theoretical price for the S&P500 index futures maturing in December 2017. Assume that the dividend yield on the index is 1.5% per year continuously compounded. Use the above quotes to determine whether there is an arbitrage opportunity. If there is an opportunity, show how the arbitrage would be made, using a payoff table. Assume that the futures contract expires at the end of the month, and use a T-bill rate of 0.70% per year continuously compounded. What are the potential problems with the arbitrage? Question 4 A fund manager has a portfolio worth $50 million with a beta of 0.92. The manager is concerned about the performance of the market over the next 4 months and plans to use 5-month futures contracts on the S&P 500 to hedge the risk. The current level of the index is 2,280, one contract is on 250 times the index, the risk-free rate is 0.75% per annum, and the dividend yield on the index is 1.5% per annum. The current 5-month futures price is 2,270. (a) What position should the fund manager take to eliminate all exposure to the market over the next four months? (b) Calculate the effect of your strategy on the fund manager's returns if the level of the market in four months is 2,100, 2,200, 2,300, and 2,400. Assume that the one-month futures price is 0.20% lower than the index level at this time. Question 5 A five-year bond with a yield of 10% (continuously compounded) pays a 7% coupon at the end of each year. (a) What is the bond's price? (b) What is the bond's duration? (c) Use the duration to calculate the effect on the bond's price of a 0.2% decrease in its yield. (d) Recalculate the bond's price on the basis of a 9.8% per annum yield and verify that the result is in agreement with your answer to (c)