Questions from Business Statistics

Q: Explain carefully what is meant by the expected price of a commodity

Explain carefully what is meant by the expected price of a commodity on a particular future date. Suppose that the futures price for crude oil declines with the maturity of the contract at the rate of...

Q: The Value Line Index is designed to reflect changes in the value

The Value Line Index is designed to reflect changes in the value of a portfolio of over 1,600 equally weighted stocks. Prior to March 9, 1988, the change in the index from one day to the next was calc...

Q: A U.S. company is interested in using the futures

A U.S. company is interested in using the futures contracts traded by the CME Group to hedge its Australian dollar exposure. Define r as the interest rate (all maturities) on the U.S. dollar and rf as...

Q: Explain why the end-of-year bonus is sometimes referred

Explain why the end-of-year bonus is sometimes referred to as ‘‘short-term compensation.’’

Q: What is meant by (a) an investment asset and (

What is meant by (a) an investment asset and (b) a consumption asset? Why is the distinction between investment and consumption assets important in the determination of forward and futures prices?

Q: Explain carefully why the futures price of gold can be calculated from

Explain carefully why the futures price of gold can be calculated from its spot price and other observable variables whereas the futures price of copper cannot.

Q: Explain carefully the meaning of the terms convenience yield and cost of

Explain carefully the meaning of the terms convenience yield and cost of carry. What is the relationship between futures price, spot price, convenience yield, and cost of carry?

Q: Consider again the situation in Problem 19.24. Suppose that

Consider again the situation in Problem 19.24. Suppose that a second traded option with a delta of 0.1, a gamma of 0.5, and a vega of 0.6 is available. How could the portfolio be made delta, gamma,...

Q: If the market considers that the default probability for a bank has

If the market considers that the default probability for a bank has increased, what happens to its DVA? What happens to the income it reports?

Q: Explain why a foreign currency can be treated as an asset providing

Explain why a foreign currency can be treated as an asset providing a known yield.