Questions from Business Statistics

Q: A trader owns 55,000 units of a particular asset and

A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contracts on another related asset. Each futures contract is on 5,000 units. The spot price...

Q: Trader A enters into futures contracts to buy 1 million euros for

Trader A enters into futures contracts to buy 1 million euros for 1.1 million dollars in three months. Trader B enters in a forward contract to do the same thing. The exchange rate (dollars per euro)...

Q: Explain what is meant by open interest. Why does the open

Explain what is meant by open interest. Why does the open interest usually decline during the month preceding the delivery month? On a particular day, there were 2,000 trades in a particular futures c...

Q: On May 3, 2016, as indicated in Table 1.

On May 3, 2016, as indicated in Table 1.2, the spot offer price of Google stock is $696.25 and the offer price of a call option with a strike price of $700 and a maturity date of September is $39.20....

Q: What is arbitrage? Explain the arbitrage opportunity when the price of

What is arbitrage? Explain the arbitrage opportunity when the price of a dually listed mining company stock is $50 (USD) on the New York Stock Exchange and $60 (CAD) on the Toronto Stock Exchange. Ass...

Q: In Problem 18.12, what does the binomial tree give

In Problem 18.12, what does the binomial tree give for the value of a six-month European put option on futures with a strike price of 60? If the put were American, would it ever be worth exercising it...

Q: Suppose that there are no storage costs for crude oil and the

Suppose that there are no storage costs for crude oil and the interest rate for borrowing or lending is 4% per annum. How could you make money if the June and December futures contracts for a particul...

Q: In March, a U.S. investor instructs a broker

In March, a U.S. investor instructs a broker to sell one July put option contract on a stock. The stock price is $42 and the strike price is $40. The option price is $3. Explain what the investor has...

Q: A U.S. company knows it will have to pay

A U.S. company knows it will have to pay 3 million euros in three months. The current exchange rate is 1.1500 dollars per euro. Discuss how forward and options contracts can be used by the company to...

Q: A bank’s derivatives transactions with a counterparty are worth þ$10

A bank’s derivatives transactions with a counterparty are worth þ$10 million to the bank and are cleared bilaterally. The counterparty has posted $10 million of cash collateral. What credit exposure d...