A firm opened a long hedge on date t, when the spot price of the underlying commodity was $50/unit and the futures that was used for delivery on date T, was trading in the futures market for $55/unit. Later, on date k, the firm traded the commodity in the spot market for $40/unit and closed its long hedge trading the futures at the futures price $46/unit.

a. Explain whether or not and why this hedge was a successful or an unsuccessful hedge.

b. Suppose that instead of the long hedge the firm above had opened a short hedge. With the same prices given above explain whether or not and why this short hedge was a successful or an unsuccessful hedge.