Recent questions tagged futures

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Explain why mould did not grow well on the bread sprinkled with lemon juice.

asked Mar 15 in Food & Drink by ♦MathsGee Diamond (88,001 points) | 21 views

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What is an asset?

asked Feb 18 in Economics & Finance by ♦MathsGee Diamond (88,001 points) | 47 views

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A non-dividend-paying stock is currently trading at $\$ 100$. A call option has one year to mature, the periodically compounded risk-free interest rate is $5.15 \%$, and the exercise price is 6100 .

asked Aug 20, 2022 in General Knowledge by ♦GaussTheBot Diamond (44,422 points) | 203 views

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Suppose two years ago we entered a $\$ 100,000,000$ seven-year receive-fixed Libor-based interest rate swap with annual resets using $30 / 360$ day count. The fixed rate in the swap contract at initiation was $3 \%$.

asked Aug 20, 2022 in General Knowledge by ♦GaussTheBot Diamond (44,422 points) | 157 views

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What are the uses of options contracts?

asked Aug 20, 2022 in General Knowledge by ♦GaussTheBot Diamond (44,422 points) | 132 views

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WHat are option contracts?

asked Aug 20, 2022 in General Knowledge by ♦GaussTheBot Diamond (44,422 points) | 138 views

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What are the differences between forwards and futures?

asked Aug 20, 2022 in General Knowledge by ♦GaussTheBot Diamond (44,422 points) | 152 views

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What are the uses of Forward/Futures Contracts?

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 145 views

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What is a Forward/Futures Contract?

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 149 views

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Price the following swaption using Black's model. The swaption is a 4-year swap, starting in 3 years, payments are annual and the principal in the swap is $\$ 100,000$. The volatility of the swap rate is $20 \%$ p.a.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 138 views

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Why might you use Black's model to price a 1-year option on a T-bond where the underlying bond is a 15-year T-bond, but not where the underlying bond is a 1-year Tbond?

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 153 views

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In the context of the one-period BOPM, what is a risk-neutral probability? Show that this risk-neutral probability is consistent with the assumption that the underlying asset $\mathrm{S}$ grows at the risk-free rate.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 76 views

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Why is the BOPM (and other 'tree methods') more flexible than closed form solutions such as the Black-Scholes formula for calls and puts?

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 117 views

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It is the $1^{\text {st }}$ January 2001 and you enter into a 2-year equity swap on a notional principal of $\$ 1 \mathrm{~m}$, where you pay LIBOR and receive the percentage return on the S\&P500 index less $0.5 \%$ p.a.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 76 views

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It is $1^{\text {st }}$ January 2001 and your firm is taking out a loan of $\$ 1$ million, with interest to be paid on $1^{\text {st }}$ April, $1^{\text {st }}$ July, $1^{\text {st }}$ October and $1^{\text {st }}$ January 2002.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 74 views

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It is $1^{\text {st }}$ June 2000 and a US multinational takes out a floating rate loan of $\$ 10$ million, with interest to be paid every 90 days, over the next year. The current LIBOR rate is $10 \%$.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 92 views

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A firm plans to borrow $\$ 10$ million in 180 days time and the loan will be for 90 days at the then prevailing LIBOR rate.

asked Aug 20, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 112 views

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A currency swap with annual payments has a remaining life of 15 months. In the swap, interest payments are exchanged at a 'coupon' rate of $6 \%$ on 50 million Australian dollars (AUD) for coupon interest payments at $4 \%$

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 130 views

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A $\$ 100$ million interest rate swap has a remaining life of 10 months. In the swap, 6 month LIBOR (floating) is exchanged for $6 \%$ p.a. "fixed" (i.e. the fixed rate is $3 \%$ over each 6-month payment period).

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 135 views

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You hold a long put option on a futures contract. The current futures price is $F_{0}=100$ and the futures price can move to either $F_{u}=115$ or $F_{d}=90$.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 120 views

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Intuitively, what is the link between the original Black-Scholes option pricing formula on an underlying asset, S, paying a continuous "dividend yield" $\delta$ and Black's formula for the price of a futures option?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 151 views

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Why might you hedge your future heating oil purchases using a call futures option on heating oil rather than a call option on heating oil?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 128 views

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On the $1^{\text {st }}$ July you hold a bond portfolio of $\$ 10 \mathrm{~m}$ and the duration is 7 years. The December US T-bond (Note) futures price is 95-12.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 86 views

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The current US, T-bond futures price is 101-12. Which of the following 3 bonds is cheapest to deliver?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 111 views

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How does 'wild card play' help the person who holds a short position in a US T-bond futures contract?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 139 views

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Intuitively, if you are long a bond portfolio with duration of $D=10$ years, how can $T$ bond futures be used to lower the duration of your bond portfolio? Why might you want to lower the duration of your bond portfolio?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 141 views

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The duration of your long bond portfolio is 12 years. You hedge your position with a futures contract where the underlying (asset) has a duration of 3 years.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 110 views

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On $10^{\text {th }}$ November, the US T-bill futures contract expiring on $28^{\text {th }}$ December $(+48$ days) was priced at $94.00$ (IMM Index). The T-bill maturing on $28^{\text {th }}$ December had a yield of $9 \%$.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 78 views

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The quoted IMM index on a US T-bill futures is $Q=90.00$ (futures discount rate $d_{f}=$ $10 \%$ ). The futures contract matures in 30 days. A 120-day T-bill is also available with a discount rate $d=10 \%$ (Day count is 'actual/360').

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 97 views

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It is the $1^{\text {st }}$ January and you are going to take out a 2-year US dollar loan in 2 months time for $\$ 5 \mathrm{~m}$, with payments linked to the 180 -day commercial paper rate $+100$ basis points.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 71 views

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Suppose the interest rate in the USA over a 6-month horizon is $10 \%$ p.a. (continuously compounded) and in the UK is $5 \%$ p.a. The current spot rate $S=2$ $(\$ / £)$.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 98 views

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How would a US firm importing goods from Switzerland in six months time hedge its position by using the futures market?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 146 views

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It is the $8^{\text {th }}$ November and the $S \& P 500$ stands at $S_{0}=441.15$. The dividend yield is $3 \%$ and the risk free rate $=3.2 \%$ (both continuously compounded).

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 86 views

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You are faced with the following information:

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 96 views

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The stock price is currently at 400 , and the quoted futures price on a 4-month contract is $405, r=10 \%$ and the dividend yield is $4 \%$ (both continuously compounded). How could you make an arbitrage profit ?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 115 views

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How can stock index futures be used as a low cost speculative "market timing" strategy?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 102 views

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What is an "intracommodity spread" in the futures market and how would you use it to speculate if you thought a bull market was imminent but you did not want to have an extremely exposed position.

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 135 views

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How Are Futures Used to Hedge a Position?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 129 views

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What is the 'convenience yield' and how does it complicate arbitrage between the spot and futures markets ?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 102 views

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Does a perfect hedge using futures, involve locking in the current spot price which will then effectively be the price paid in the future?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 112 views

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Why might you need to "roll over the hedge" in the futures market?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 130 views

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Why do futures provide leverage?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 81 views

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How can you speculate with a long futures contract if you sell it either prior to maturity or hold the contract to maturity ?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 95 views

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Who might find a futures contract on orange juice useful?

asked Aug 18, 2022 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 90 views

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In contrast to forward contracts, futures contracts:

asked Aug 11, 2021 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 307 views

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When is best to use forwards? Futures? Swaps?

asked Jul 18, 2021 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 170 views

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How do forward and futures work? How do you use them to hedge against currency risks?

asked Jul 18, 2021 in General Knowledge by ♦MathsGee Diamond (88,001 points) | 229 views

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How do I describe the "Exchange Rate" between two currencies?

asked Jan 3, 2021 in Mathematics by ♦MathsGee Diamond (88,001 points) | 237 views

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How do I make money when shares are falling?

asked Oct 5, 2020 in Mathematics by ♦MathsGee Diamond (88,001 points) | 226 views

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What is a margin call?

asked Oct 5, 2020 in Mathematics by ♦MathsGee Diamond (88,001 points) | 183 views

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