1. Plot the unhedged values and hedged values over time. Discuss whether your strategy was successful. Specifically, did your futures position lower the currency risk?

2. Calculate the standard deviations of the unhedged values. In addition, calculate the standard deviation of hedged values.. Discuss whether your strategy was successful.

 

Transcribed Image Text:

EUR/USD 1.1926 1.1852 1.1898 1.1926 1.1986 1.195 1.1926 1.1902 1.1983 1.1918 1.883 1.1933 1.184 1.1813 1.1777 1.1788 1.1771 1.1724 1.1729 1.1768 1.1819 1.1874 1.1874 1.1916 Euro FX Future P Price Change Daily Gains 1.1869 1.1911 1.1933 1.1993 1.1959 1.1935 1.1913 1.1987 1.1922 1.1916 1.1949 1.1859 1.1829 1.1782 1.1796 1.1769 1.1722 1.1729 1.1774 1.1815 1.1874 1.1868 1.1919 1.1904 -0.0042 -0.0022 -0.006 0.0034 0.0024 0.0022 -0.0074 0.0065 0.0006 -0.0033 0.009 0.003 0.0047 -0.0014 0.0027 0.0047 -0.0007 -0.0045 -0.0041 -0.0059 0.0006 -0.0051 0.0015 -26250 -13750 -37500 21250 15000 13750 -46250 40625 3750 -20625 56250 18750 29375 -8750 16875 29375 -4375 -28125 -25625 -36875 3750 -31875 9375 110000 100000 100000 Cumulative G Margin Acco Unhedged Value Hedged Value 5240650.68 5240650.68 5273371.58 5247121.58 5252983.69 5212983.69 5240650.68 5163150.68 5214416.82 5158166.82 5230125.52 5188875.52 5240650.68 5213150.68 5251218.28 5177468.28 5215722.27 5182597.27 5244168.48 5214793.48 3319171.53 3269171.53 5237576.47 5243826.47 5278716.22 5303716.22 -26250 -40000 -77500 -56250 -41250 -27500 -73750 -33125 -29375 -50000 6250 25000 54375 45625 62500 91875 87500 59375 33750 -3125 625 -31250 -21875 100000 121250 136250 150000 103750 144375 148125 127500 183750 202500 231875 223125 240000 269375 265000 236875 211250 174375 178125 146250 155625 100000000000000000000 5290781.34 5345156.34 5306954.23 5352579.23 5302002.04 5364502.04 5309659.33 5401534.33 5330945.07 5418445.07 5328672.52 5388047.52 5311012.92 5344762.92 5288095.44 5284970.44 5263601.15 5264226.15 5263601.15 5232351.15 5245048.67 5223173.67 EUR/USD 1.1926 1.1852 1.1898 1.1926 1.1986 1.195 1.1926 1.1902 1.1983 1.1918 1.883 1.1933 1.184 1.1813 1.1777 1.1788 1.1771 1.1724 1.1729 1.1768 1.1819 1.1874 1.1874 1.1916 Euro FX Future P Price Change Daily Gains 1.1869 1.1911 1.1933 1.1993 1.1959 1.1935 1.1913 1.1987 1.1922 1.1916 1.1949 1.1859 1.1829 1.1782 1.1796 1.1769 1.1722 1.1729 1.1774 1.1815 1.1874 1.1868 1.1919 1.1904 -0.0042 -0.0022 -0.006 0.0034 0.0024 0.0022 -0.0074 0.0065 0.0006 -0.0033 0.009 0.003 0.0047 -0.0014 0.0027 0.0047 -0.0007 -0.0045 -0.0041 -0.0059 0.0006 -0.0051 0.0015 -26250 -13750 -37500 21250 15000 13750 -46250 40625 3750 -20625 56250 18750 29375 -8750 16875 29375 -4375 -28125 -25625 -36875 3750 -31875 9375 110000 100000 100000 Cumulative G Margin Acco Unhedged Value Hedged Value 5240650.68 5240650.68 5273371.58 5247121.58 5252983.69 5212983.69 5240650.68 5163150.68 5214416.82 5158166.82 5230125.52 5188875.52 5240650.68 5213150.68 5251218.28 5177468.28 5215722.27 5182597.27 5244168.48 5214793.48 3319171.53 3269171.53 5237576.47 5243826.47 5278716.22 5303716.22 -26250 -40000 -77500 -56250 -41250 -27500 -73750 -33125 -29375 -50000 6250 25000 54375 45625 62500 91875 87500 59375 33750 -3125 625 -31250 -21875 100000 121250 136250 150000 103750 144375 148125 127500 183750 202500 231875 223125 240000 269375 265000 236875 211250 174375 178125 146250 155625 100000000000000000000 5290781.34 5345156.34 5306954.23 5352579.23 5302002.04 5364502.04 5309659.33 5401534.33 5330945.07 5418445.07 5328672.52 5388047.52 5311012.92 5344762.92 5288095.44 5284970.44 5263601.15 5264226.15 5263601.15 5232351.15 5245048.67 5223173.67

Answer rating: 100% (QA)

Answer 1 Plotting the unhedged and hedged values over time shows that the hedging strategy was succe... View the full answer