Dervaties Assignment

14.11.2012 Derivatives Question 1 Initial security deposit per contract: $1500 Initial symmetricalness of beach peak: $15000 forethought Margin per contract: $1100 weigh of contracts: 10 a) Since the future scathe of flamboyant is $276,50, and the settlement worth is $278, the transitory is $1,50 per oz. The investor incurs a loss and the perimeter account is diminish by 100*$1,5=$150 per contract. join loss amounts to $150*10contracts=$1500. freshly symmetricalness of brink account is $13.500. A allowance puzzle (at the maintenance brink of 1100) is punish at $11.000. So, no margin call is heard. b) The total remainder from the futures price is now 281-276,50=4,5. This has (cumulatively) lessen the margin account to 10.500 (15.000-4.500), which is on a lower floor the maintenance margin. So, the investor receives a margin call. c) The margin account was surpass back to its original retire aim of $ 15.000. With a slump of the price of gold per oz of 5 (281-276) the investor makes a profit and the margin account increases to 15.000+(5*1.000)= $20.000. This is the closing balance of the margin account.

d) The total gain, ignoring use up, amounts to 276,5-276=0,50,5*10*100= $ 500 Question 2 a) The 3-month merchandise innocent forward price is: (99,75-4*e ^(-0,05*2/12))*e^(0,06*3/12) = 97,2308 b) The forward price is lower than the price we calculated down the stairs 2a, so the forward is underpriced. To make a profit from this digression we could engagement the following strategy: At t=0: ActionCash Flow get the forward0 Borrow amaze0 Sell connect+99,75 Invest PV coupon (2-months)-3,97 (4*e ^(-0,05*2/12)) Invest the live(3-months)-95,78(99,75-3,97) T=0 net knotty exchange flow=0 afterward two months Receive interest + track on coupon investment 4 pay coupon-4 T=2 months => net cash flow=0 At maturity Pay forward contract to receive stick to-97 mean out bond position0 Receive interest + jump shot lead on rest investment...If you want to get a salutary essay, order it on our website: Orderessay

If you want to get a full information about our service, visit our page: How it works.