Finance - Settlement of the Futures Contract Assessment Answer

Finance

Name

Institution

Question 1

F (0,T)S0(1r)T

Price 2114.37 (1 0.038) (326/365)

2114.37 (1 0.038) (0.8932)

964.62

Question 2

It is false to claim that both the forward and future prices are always the same.

Reason Both the future and forward prices on an underlying asset imply that the futures and forward contract increases meaning that there might be no daily difference arising. The daily settlement of the futures contract and that of the forward may not settle on a daily basis.

Question 3

(0 ()/0)1/ 1

((1.1 (500000)/1.2) (1/60) 1 0.24

(1.2 0.24) 0.96

(500000 0.96) 480,000

(500000 - 480,000)

Euro 20,000

Question 4

ln (0 ()/0)

ln (2930/55)/ (244/365) 0.004

5.95

Question 5

FV (DIV) 19.3 (1.015) (45/365)

1.44

Question 6

FV (DIV) 1.6 (1.02) (38/365) 1.6 (1.02) (158/365) 1.6 (1.02) (278/365)

1.0523 1.2362 1.4521

3.74

96 (1.02) (300/365) 3.74

39.54

Question 7

FV (DIV) 1.7 (1.02) (38/365) 1.7 (1.02) (158/365) 1.7 (1.02) (278/365)

1.0590 1.2692 1.5208

3.85

144 (1.02) (200/365) 3.85

11.54

References

Oosterlinck, K. (2017). History of Forward Contracts (Historical Evidence for Forward Contracts). The New Palgrave Dictionary of Economics, 1-3.

Schneider, I., Botterud, A., amp Roozbehani, M. (2017, November). Forward Contracts and Generator Market Power How Externalities Reduce Benefits in EquiliPium. In Riding the Energy Cycles, 35th USAEE/IAEE North American Conference, Nov 12-15, 2017. International Association for Energy Economics.

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