What kind of futures or options hedges would be called

Reference no: EM131319226

Jun 08	Open	High	Low	Settle	Chg	High	Lifetime	Low	Open Int
Eurodollar (CME) -$1,000,000; pts of 100 %
Jun 08	97.2725	97.2875	97.2025	97.2150	-.0520	98.2550		91.6800	1,264,397
Jly 08	97.2150	97.2250	97.0900	97.1200	-.1150	98.1850		97.0300	13,725
Aug 08	97.1200	97.1200	96.9500	96.9850	-.2150	98.2200		96.9500	2,929
Sep 08	97.1600	97.1850	96.8300	96.8850	-.2850	98.3350		91.6800	1,453,920
Dec 08	96.9750	97.0050	96.5500	96.6050	-.3800	98.2650		91.5700	1,384,300
Mar 09	96.8850	96.9200	96.4000	96.4550	-.4400	98.1850		91.5750	1,229,271
Jun 09	96.6900	96.7350	96.2200	96.2600	-.4500	98.0000		91.3100	985,412
Sep 09	96.4600	96.4900	96.0200	96.0450	-.4200	97.7700		91.2600	813,642
Dec 09	96.1650	96.2000	95.7750	95.8000	-.3700	97.5050		91.1600	607,401
Mar 10	95.9500	95.9850	95.5900	95.6150	-.3350	97.2750		91.4850	474,017

Q1: Use the quotes of Eurodollar futures contracts traded on the Chicago Mercantile Exchange as shown below to answer the following questions:

a. What is the annualized discount yield based on the "low index price for the nearest March contract?

b. If your financial firm took a short position at the high price for the day for 15 tracts contracts, what would be the dollar gain or loss at settlement on June 9, 2008?

c. If you deposited the initial required hedging margin in your equity account upon taking the position described in b, what would be the marked-to-market value of your equity account at settlement?

Q2: What kind of futures or options hedges would be called for in the situations?

a. Market interest rates are expected to increase and your financial firm asset-liability managers expect to liquidate a portion of their bond portfolio to meet customers' demands for funds in the upcoming quarter.

b. A survey of Tuskee Bank's corporate loan this month January) their cates that on balance, this group of firms will need to draw $165 million from credit lines in February and March, which is $65 million more than the bank management has forecasted and prepared for. The bank's economist has predicted a significant increase in money market interest rates over the next 60 days.

Q3: Discuss how these techniques can be applied to a large multinational company with a wide range of products using a published research paper from the (Using EBSCO/ Google scholar/Harvard review) Library. Attach your summary (Objective of the study and How the pricing and profitability are measured in the research paper? and Findings) with the Report.

Reference no: EM131319226

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