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Question 5 : Commodity Futures ( 2 1 0 ) Table 1 shows the hypothetical daily closing prices for one unit of corn, and the
Question : Commodity Futures Table shows the hypothetical daily closing prices for one unit of corn, and the daily prices for the corn futures contract with maturity date Jan The futures contract size is units of corn.
The initial margin required for the futures contract is $ per contract. The maintenance margin is $ per contract. The risk free rate is annual continuously compounded Assume this is the rate you earn on your margin account.
Suppose you take a long position in futures contracts on Jan What is your profitloss on Jan and Jan What is the balance in your margin account at the end of Jan and Jan Do you face any margin calls?
Following at the end of Jan you will pay per unit to purchase the corn, and your margin account is returned to you. What is your total profitloss from Jan to Jan both including interest and excluding interest? Hint: when excluding interest, total payoff should be the same as the formula
Repeat part for a short position of futures contracts.
Suppose there is a lease market for corn. Using the Jan corn price and futures price, what is the implied equilibrium lease rate annual continuously compounded on corn?
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