Solution-Compute the net revenue from oil for bp

Compute the net revenue from oil for bp

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Reference no: EM133060287

Assume that you will have 1 Barrel of oil (you are a finance manager at BP which sells oil), one month from today. The current price of oil is $86.0 / barrel. You expect that the future spot price/barrel could be either, $80.0, $96.0, or $106.0 with equal probability.

The 1 month forward rate of oil is $97.0 / Barrel.

The price of an at-the-money Call option on oil is $10.0 per barrel.

The price of an at-the-money Put option on oil is $12.0 per barrel.

Compute the Net revenue from oil for BP under each of the following scenarios, by filling in the table on the Next Question.

Net Final Revenue /barrel of oil if you did not hedge, i.e. sell in open market after 1 month.
Net Final Revenue /barrel of oil if you used a Forward contract (Specify Long or Short)
Net Final Revenue /barrel of oil if you used Call options to hedge (Specify Buy or Sell)
Net Final Revenue /barrel of oil if you used Put options to hedge (Specify Buy or Sell)

Strategy	S_T = 80	S_T = 96	S_T = 106
1. Revenue if you do not Hedge
2. Total Revenue if you use a Forward Contract
3. Total Revenue if you use a Call Option
4. Total Revenue if you use a Put Option

Reference no: EM133060287

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Compute the net revenue from oil for bp

Reference no: EM133060287

Reference no: EM133060287

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