Question
Therere two gold mining companies, A and B. They had similar financial situation and both had found gold somewhere in Africa. And it takes around
Therere two gold mining companies, A and B. They had similar financial situation and both had found gold somewhere in Africa. And it takes around 2 years for A and B to dig the gold out. In order to hedge against gold price decreasing in two years, A and B chose to use forward and futures.
a. Do they need to long or short?
b. It turned out company A was using forward and B was using futures to hedge. After they entered into the forward/futures positions, the gold price has increased dramatically. And one company has gone to bankruptcy recently before it dig the gold out. Using what you have leant in the derivative class, guess which company has gone to bankruptcy, A or B, and why?
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