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ted below are examples of different trades for oil. For each example, explain what all the trading cisks involved would be with the specified trade
ted below are examples of different trades for oil. For each example, explain what all the trading cisks involved would be with the specified trade (i.e. flat price risk, location basis risk product/quality basis risk, and/or each trade to lower some of these You are currently an oil producer in the Bakken oil area of North Dakota. You are really good at extracting oil but maybe not so good at finance. You would like to hedge the price of your oil production for delivery in May 2017. You choose to hedge your position with a futures contract based on Brent oil due in July 2017. a. (10 points) a refinery outside of Philadelphia on the U.S. eastem coast. You are importing oil Saudi Arabia to use in your refinery. You are worried about the price of oil for delivery b. You own from to your refinery traded on the NYMEX based on West Texas Intermediate (WTI) due in November 2016. in December 2016. You choose to hedge your risk with a futures contract ted below are examples of different trades for oil. For each example, explain what all the trading cisks involved would be with the specified trade (i.e. flat price risk, location basis risk product/quality basis risk, and/or each trade to lower some of these You are currently an oil producer in the Bakken oil area of North Dakota. You are really good at extracting oil but maybe not so good at finance. You would like to hedge the price of your oil production for delivery in May 2017. You choose to hedge your position with a futures contract based on Brent oil due in July 2017. a. (10 points) a refinery outside of Philadelphia on the U.S. eastem coast. You are importing oil Saudi Arabia to use in your refinery. You are worried about the price of oil for delivery b. You own from to your refinery traded on the NYMEX based on West Texas Intermediate (WTI) due in November 2016. in December 2016. You choose to hedge your risk with a futures contract
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