1.4. Suppose that on 25 November 2022 you decided to only hedge the June 2023 interest...

 

Transcribed Image Text:

1.4. Suppose that on 25 November 2022 you decided to only hedge the June 2023 interest rate exposure. Suppose you used the JIBAR futures for June 2023 as the hedging instrument. Suppose it is now 10 January 2023 and you decided to exit this hedged position for June 2023. Suppose the 2023 JIBAR Futures contracts are priced on 10 January as in Table 1.3 below. 1.4.1. Calculate and use the futures contract prices (i.e. PV of R100000 per contract) at which you entered and exited the futures contract. Use this price information to calculate the profit/loss your hedge would amount to if you offset your position on 10 January (5) 1.4.2. Use the Index values in Tables 1.1 and 1.3 to show the index values at which you entered and exited the futures contract. Use this index information to calculate the profit/loss your hedge would amount to if you offset your position on 10 January (5) Table 1.3: JIBAR Futures contract prices on 10 January 2023 March 16, 2023 (expiration in 66 days): June 16, 2023 (expiration in 156 days): September 16, 2023 (expiration in 246 days): Index value 93.9488 93.0706 92.6266 1.4.3. Now, instead, suppose you used the FRA201x291 (as calculated in 1.3 above) as the hedging instrument. Suppose it is now 10 January 2023 and you decided to exit this hedged position for June 2023. Suppose the available JIBAR spot rates in the market on 10 January were as in Tablet 1.4 below. What profit/loss would your hedge amount to if you offset your position on 10 January? (11) Table 1.4: JIBAR Spot rates (NAC) on 10 January 2023: JIBAR 66-day rate: 5.9070% JIBAR 90-day rate: 5.9840% JIBAR 156-day rate: 6.0280% JIBAR 180-day rate: 6.3250% JIBAR 246-day rate: JIBAR 270-day rate: JIBAR 336-day rate: JIBAR 360-day rate: 6.4240% 6.7100% 6.7650% 7.1390% 1.4. Suppose that on 25 November 2022 you decided to only hedge the June 2023 interest rate exposure. Suppose you used the JIBAR futures for June 2023 as the hedging instrument. Suppose it is now 10 January 2023 and you decided to exit this hedged position for June 2023. Suppose the 2023 JIBAR Futures contracts are priced on 10 January as in Table 1.3 below. 1.4.1. Calculate and use the futures contract prices (i.e. PV of R100000 per contract) at which you entered and exited the futures contract. Use this price information to calculate the profit/loss your hedge would amount to if you offset your position on 10 January (5) 1.4.2. Use the Index values in Tables 1.1 and 1.3 to show the index values at which you entered and exited the futures contract. Use this index information to calculate the profit/loss your hedge would amount to if you offset your position on 10 January (5) Table 1.3: JIBAR Futures contract prices on 10 January 2023 March 16, 2023 (expiration in 66 days): June 16, 2023 (expiration in 156 days): September 16, 2023 (expiration in 246 days): Index value 93.9488 93.0706 92.6266 1.4.3. Now, instead, suppose you used the FRA201x291 (as calculated in 1.3 above) as the hedging instrument. Suppose it is now 10 January 2023 and you decided to exit this hedged position for June 2023. Suppose the available JIBAR spot rates in the market on 10 January were as in Tablet 1.4 below. What profit/loss would your hedge amount to if you offset your position on 10 January? (11) Table 1.4: JIBAR Spot rates (NAC) on 10 January 2023: JIBAR 66-day rate: 5.9070% JIBAR 90-day rate: 5.9840% JIBAR 156-day rate: 6.0280% JIBAR 180-day rate: 6.3250% JIBAR 246-day rate: JIBAR 270-day rate: JIBAR 336-day rate: JIBAR 360-day rate: 6.4240% 6.7100% 6.7650% 7.1390%

Answer rating: 100% (QA)

141 Calculate and use the futures contract prices ie PV of R100000 per contract at which you entered and exited the futures contract Use this price information to calculate the profit loss your hedge ... View the full answer