Construct an appropriate hedging strategy

Assignment Help Operation Management
Reference no: EM132951331

Suppose you are a dealer in sugar. It is now August 2021, and you are holding 300,000 kg of sugar worth $0.1500 per kg. You want to fully hedge your exposure with some sugar futures contracts expiring in January 2022. The current price of the sugar futures is $0.1600 per kg and each contract is for 60,000 kg.

(a) Construct an appropriate hedging strategy to accommodate your objective.

(b) Suppose you terminate the hedge early in the coming December. The spot price is $0.1375 per kg and the January futures price is $0.1450 per kg. Determine the outcomes of your hedging strategy in part (a).

Reference no: EM132951331

Questions Cloud

What will be the net gain or loss from the trades : b) Suppose you decided to long five contracts of August HRC Steel Futures on the next day (Day 1) at the price of $1,760 per ton. If you closed all positions at
Calculate the rate of return for the owners : Now, Dr. Pennyworth has a chance to purchase one of two professional cricket clubs, the Miami Manatees or the Jacksonville Gemini. At the beginning of last year
Determine the effective cost of borrowing per annum : Suppose you have agreed to take a short-term loan amounting of $2,000,000 from your banker. The loan tenure begins on 3 months from today and the financing rate
How much is incremental profit if facey farm slaughters : The production generates 60,000 fishes which can be sold for $1 each, If Facey Farm slaughters the fishes, how much is incremental profit or loss?
Construct an appropriate hedging strategy : Suppose you are a dealer in sugar. It is now August 2021, and you are holding 300,000 kg of sugar worth $0.1500 per kg. You want to fully hedge your exposure wi
How did the firms account for the acquisition : Access the investor relations, How did the firms account for the acquisition? How did the firms account for its acquisition-related expenses?
Calculate the productivity in labor expense : Calculate the productivity in sales revenue/labor expense. Sailmaster makes high-performance sails for competitive windsurfers.
Discuss the term underlying : (a) "It seems that speculators are merely gamblers, because what they do are just betting money on something unpredictable with uncertain outcomes." Is the stat
What was percentage change in productivity over past years : This year, the firm handled 112,160 deliveries with 93 drivers. What was the percentage change in productivity over the past two years?

Reviews

Write a Review

Operation Management Questions & Answers

  Differences in ages which could be part of studies

Are there differences in how research might occur given the differences in ages which could be part of studies?

  Conveying your thoughts to company you are stakeholder in

What difference can you, can any stakeholder make, by conveying your thoughts to the company you’re a stakeholder in?

  What are the threats of parkour gym

What’s are the Strengths (Internal, Positive factors) for a parkour gym? What are the threats (external, negative effects) of a parkour gym?

  Example do you see pressures for global integration

Where in this example do you see pressures for global integration? Where do you see pressures for local responsiveness?

  Genesis system upgrade project

Your procurement team is planning to buy low light, network surveillance cameras and digital video recorders (DVR's) for the Genesis System Upgrade project. What should go into make-or-buy analysis. What are your seller selection criteria?

  Compute the forecast for the week of october 12

Compute the forecast for the week of October 12 using exponential smoothing with a forecast for August 31 of 360 and a = .2.

  About a brand that has become legendary

Find and report on an article that talks about a brand (product or service) that has become “legendary”. Legendary can mean a long history,

  Response grant proposal goal statement

Find and include in your response a grant proposal goal statement that you found to be well written. Discuss the elements of a well written goal statement.

  Implement career development

How do you plan to implement career development using internal and external resources?

  Curb workplace violence in health care facilities

House Democrats have introduced legislation intended to curb workplace violence in health care facilities.

  Value or lack thereof of business code of ethics

There seems to be a divergence of opinion on the value or lack thereof of a business code of ethics.

  Decided to implement voice recognition system

Medical Clinic is a 20-physician multi-disciplinary practice. The clinic has decided to implement a voice recognition system.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd