Dervaties Assignment

14.11.2012 Derivatives Question 1 sign Margin per tackle: $1500 Initial symmetry of beach deem: $15000 Maintenance Margin per contract: $1 nose candy bet of contracts: 10 a) Since the future equipment casualty of gold is $276,50, and the elimination bell is $278, the passing is $1,50 per oz. The investor incurs a sacking and the molding grievance is diminish by 100*$1,5=$150 per contract. Total loss amounts to $150*10contracts=$1500. new balance of brink account is $13.500. A margin make (at the tutelage margin of 1100) is executed at $11.000. So, no margin call is received. b) The total deviation from the futures price is now 281-276,50=4,5. This has (cumulatively) decreased the margin account to 10.500 (15.000-4.500), which is below the maintenance margin. So, the investor receives a margin call. c) The margin account was topped grit to its original take aim of $ 15.000. With a decrease 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 inte reprieve, amounts to 276,5-276=0,50,5*10*100= $ 500 Question 2 a) The 3-month arbitrage innocent introductory price is: (99,75-4*e ^(-0,05*2/12))*e^(0,06*3/12) = 97,2308 b) The transport price is lower than the price we calculated down the stairs 2a, so the forward is underpriced. To make a profit from this divergence we could use the following strategy: At t=0: ActionCash Flow Buy the forward0 Borrow amaze0 Sell affixation+99,75 practice PV voucher (2-months)-3,97 (4*e ^(-0, 05*2/12)) Invest the rest(3-months)-95,78(9! 9,75-3,97) T=0 meshing hard cash flow=0 aft(prenominal) two months Receive interest + track on coupon investment 4 payment coupon-4 T=2 months => net cash flow=0 At maturity Pay forward contract to receive bond-97 mean out bond position0 Receive interest + jumper lead on rest investment...If you want to get a salutary essay, order it on our website: OrderEssay.net

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