Question: DO NOT ANSWER THE SAME ANSWER GIVEN ALREADY. GIVE YOUR OWN ANSWER OR STAY AWAY FROM THE QUESTION!! 6. Assume that you will have 1

DO NOT ANSWER THE SAME ANSWER GIVEN ALREADY. GIVE YOUR OWN ANSWER OR STAY AWAY FROM THE QUESTION!!

6. Assume that you will have 1 Barrel of oil (you are a finance manager at BP which sells oil), one month from today. The current price of oil is $86.0 / barrel. You expect that the future spot price/barrel could be either, $80.0, $96.0, or $106.0 with equal probability. The 1-month forward rate of oil is $97.0 /Barrel. The price of an at-the-money Call option on oil is $10.0 per barrel. The price of an at-the-money Put option on oil is $12.0 per barrel. Compute the Net revenue from oil for BP under each of the following scenarios, by filling in the following table. [20 pts.] Strategy Spot Price in 1 month Spot Price in 1 $80.0 month = $96.0 Spot Price in 1 month = $106.0 1) No Hedge: Net Revenue 2) Using Forward Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Forward (iii = i + ii) Net Revenue 3) Using Call options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue 4) Using Put options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue 6. Assume that you will have 1 Barrel of oil (you are a finance manager at BP which sells oil), one month from today. The current price of oil is $86.0 / barrel. You expect that the future spot price/barrel could be either, $80.0, $96.0, or $106.0 with equal probability. The 1-month forward rate of oil is $97.0 /Barrel. The price of an at-the-money Call option on oil is $10.0 per barrel. The price of an at-the-money Put option on oil is $12.0 per barrel. Compute the Net revenue from oil for BP under each of the following scenarios, by filling in the following table. [20 pts.] Strategy Spot Price in 1 month Spot Price in 1 $80.0 month = $96.0 Spot Price in 1 month = $106.0 1) No Hedge: Net Revenue 2) Using Forward Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Forward (iii = i + ii) Net Revenue 3) Using Call options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue 4) Using Put options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue

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