case study

PowerPoint Presentation IC301 Derivative Securities 2 IC301 – Topic 2 Forwards and Futures Hedging & Speculation Hedging Spot (ST) Profit or Loss (+/-) Spot (ST) K Underlying price risk Hedge by selling short K 10 Hedging 4 Hedging doesn’t mean “no risk” It matters what the competition does Consider two companies (A&B) that both benefit

PowerPoint Presentation IC301 Derivative Securities 2 IC301 – Topic 10 Exotic options, ETFs & CFDs ETFs – Exchange traded funds 3 record high of nearly $4.3 trillion in assets by the end of July 2017. In addition to the ongoing trend of investors shifting to low-cost ETFs from actively-managed funds. Three largest ETF providers (BlackRock,

IC 301 IC 301 Seminar 2 Hedging Basis Basis = Price of an underlying/asset – Price of Future Basis risk: risk that offsetting investments will not experience price changes in completely opposite directions Short hedge: long the asset, short the future S-F ======> you are LONG the basis Long hedge: short the asset, long the

Topic 2 tutorial questions: • Who initiates delivery in a corn futures contract? • The party with the long position • The party with the short position • Either party • The exchange 
 • You sell one December futures contracts when the futures price is $1,010 per unit. Each contract is on 100 units