Exam 5: Hedging With Futures Forwards

Suppose you want to hedge a futures contract A with another futures contract B.You calculate the minimum-variance hedge ratio ignoring daily resettlement (for example,by regressing daily changes in Contract A's prices on daily changes in Contract B's prices).Suppose,however,that both contracts are marked-to-market daily.Which of the following statements is always true?

(Multiple Choice)

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Question 21

If the futures contract used to hedge a spot position is marked-to-market daily,then the minimum-variance hedge ratio formula $h ^ { * } = \rho \times \sigma ( \Delta S ) / \sigma ( \Delta F )$ computed ignoring daily resettlement is,in absolute terms,

(Multiple Choice)

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Question 22

If changes in spot and futures prices have a correlation of $- 1$ ,then

(Multiple Choice)

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Question 23

Showing 21 - 23 of 23

If the futures contract used to hedge a spot position is marked-to-market daily,then the minimum-variance hedge ratio formula $h ^ { * } = \rho \times \sigma ( \Delta S ) / \sigma ( \Delta F )$ computed ignoring daily resettlement is,in absolute terms,

If changes in spot and futures prices have a correlation of $- 1$ ,then

Overview

Futures Markets

Pricing Forwards and Futures I

Pricing Forwards Futures II

Interest-Rate Forwards Futures

Options Markets

Options: Payoffs Trading Strategies

No-Arbitrage Restrictions

Early-Exercise/Put-Call Parity

Option Pricing: An Introduction

Binomial Option Pricing

Implementing the Binomial Model

The Black-Scholes Model

Mathematics of Black-Scholes

Beyond Black-Scholes

The Option Greeks

Path-Independent Exotic Options

Exotic Options II: Path-Dependent Options

Value at Risk

Swaps and Floating Rate Products

Equity Swaps

Currency and Commodity Swaps

Term Structure of Interest Rates: Concepts

Estimating the Yield Curve

Modeling Term Structure Movements

Factor Models of the Term Structure

The Heath-Jarrow-Morton Hjmand Libor Market Model LMM

Credit Derivative Products

Structural Models of Default Risk

Reduced-Form Models of Default Risk

Modeling Correlated Default

Filters

Exam 5: Hedging With Futures Forwards

If the futures contract used to hedge a spot position is marked-to-market daily,then the minimum-variance hedge ratio formula h∗=ρ×σ(ΔS)/σ(ΔF)h ^ { * } = \rho \times \sigma ( \Delta S ) / \sigma ( \Delta F )h∗=ρ×σ(ΔS)/σ(ΔF) computed ignoring daily resettlement is,in absolute terms,

If changes in spot and futures prices have a correlation of −1- 1−1 ,then

Overview

Futures Markets

Pricing Forwards and Futures I

Pricing Forwards Futures II

Interest-Rate Forwards Futures

Options Markets

Options: Payoffs Trading Strategies

No-Arbitrage Restrictions

Early-Exercise/Put-Call Parity

Option Pricing: An Introduction

Binomial Option Pricing

Implementing the Binomial Model

The Black-Scholes Model

Mathematics of Black-Scholes

Beyond Black-Scholes

The Option Greeks

Path-Independent Exotic Options

Exotic Options II: Path-Dependent Options

Value at Risk

Swaps and Floating Rate Products

Equity Swaps

Currency and Commodity Swaps

Term Structure of Interest Rates: Concepts

Estimating the Yield Curve

Modeling Term Structure Movements

Factor Models of the Term Structure

The Heath-Jarrow-Morton Hjmand Libor Market Model LMM

Credit Derivative Products

Structural Models of Default Risk

Reduced-Form Models of Default Risk

Modeling Correlated Default

Filters

If the futures contract used to hedge a spot position is marked-to-market daily,then the minimum-variance hedge ratio formula $h ^ { * } = \rho \times \sigma ( \Delta S ) / \sigma ( \Delta F )$ computed ignoring daily resettlement is,in absolute terms,

If changes in spot and futures prices have a correlation of $- 1$ ,then