You have to make a 90,000,000 payment in Japanese Yen

jagguarpaw February 2, 2017 0 Comments

Question: 1.You have to make a 90,000,000 payment in Japanese…

  1. You have to make a 90,000,000 payment in Japanese Yen on close of business day, Friday, January 20th. You decide to hedge your risk with the futures contracts. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 12,500,000 yen.

a.Describe the position you decide to enter (long or short).

b.Describe the contract (what month, and what quantity).

c.Document the gain or loss due to marking to market every day that your position is open.

d.What is the total cost in US$ after you have closed out your futures positions, and made your payment?

e.What would have been the total cost in US$, if you had not hedged? Did you benefit from hedging?

f.Repeat steps a) – e) assuming that you expect a payment of 900,000 British pounds on close of business day, Friday, January 20th. Assume you that you enter into the futures position at a close of day on Tuesday, January 17th. Futures and spot data are provided in the file HW1_data.doc. Contract size is 62,500 British pounds.

Japanese Yen Data

Daily Settlements for Japanese Yen Future (FINAL)Trade Date: Wednesday, 01/18/2017

Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest
MAR 17 88835 88935 87285 87360 -740 88175 147,488 203,079
JUN 17 89250 89385B 87745A 87820B -745 88625 383 8,556
SEP 17 89455 89535B 88285A 88285A -760 89110 11 57
DEC 17 88925A 88925A -755 89605 0 15
MAR 18 89500A 89500A -740 90150 0 34
JUN 18 90110A 90110A -760 90740 0 11

Daily Settlements for Japanese Yen Futures (FINAL)Trade Date: Friday, 01/20/2017

Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest
MAR 17 87080 87695 86800 87400 +390 87650 195,951 194,478
JUN 17 87570 88125B 87255A 87830A +390 88095 319 8,477
SEP 17 88555B 87815A 88370A +380 88575 0 59
DEC 17 88860 89000B 88395A 88860 +375 89070 1 16
MAR 18 89455B 88965A 89455B +390 89625 0 34
JUN 18 89630A 89840B +360 90210 0 11

Spot data:

Jul.Day YYYY/MM/DD Wdy USD/JPY
2457771 2017/01/17 Tue 0.0088515
2457772 2017/01/18 Wed 0.0088184
2457773 2017/01/19 Thu 0.0086728
2457774 2017/01/20 Fri 0.0086888

British Pound Data

Daily Settlements for British Pound Future (FINAL)Trade Date: Wednesday, 01/18/2017

Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest
MAR 17 1.2419 1.2425 1.2268 1.2278 -.0110 1.2301 127,644 227,440
JUN 17 1.2452 1.2454B 1.2301A 1.2305B -.0110 1.2333 290 1,031
SEP 17 1.2376 1.2421B 1.2327 1.2327 -.0109 1.2367 2 175
DEC 17 1.2381A 1.2381A -.0110 1.2401 0 129
MAR 18 1.2426A 1.2426A -.0109 1.2446 0 4
JUN 18 1.2478A 1.2478A -.0108 1.2488 0 3

Daily Settlements for British Pound Futures (FINAL)Trade Date: Friday, 01/20/2017

Month Open High Low Last Change Settle Estimated Volume Prior Day Open Interest
MAR 17 1.2349 1.2394 1.2273 1.2390 +.0043 1.2392 98,611 223,605
JUN 17 1.2398 1.2424B 1.2308 1.2422 +.0043 1.2425 129 1,348
SEP 17 1.2395 1.2455B 1.2347A 1.2442B +.0044 1.2460 1 175
DEC 17 1.2487B 1.2395A 1.2475A +.0043 1.2494 0 129
MAR 18 1.2521B 1.2439A 1.2518A +.0040 1.2538 0 4
JUN 18 1.2551B 1.2491A 1.2551B +.0038 1.2579 0 3

Spot Data:

Jul.Day YYYY/MM/DD Wdy USD/GBP
2457771 2017/01/17 Tue 1.2384
2457772 2017/01/18 Wed 1.2309
2457773 2017/01/19 Thu 1.2318
2457774 2017/01/20 Fri 1.2328