Explain the process of caculating daily gain/cost and closing margin account balance.

and the proce of how to caculate Min Variance hedge Ratio and number of contracts, and how to get the answer of cumulative futures[/L and Hedged Postiition Value.

  

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Part C: Hedging an underlying asset using futures Sharon is a potato farmer who wants to sell her potatoes in 20 days. She is concerned about adverse price changes over the next 20 days and wishes to hedge Sharon decides to cross hedge her position worth $3,500,000 TODAY using futures on wheat - the correlation between potatoes and wheat is 0.98. Using the following information, construct a hedge for Sharon: Correlation Std. Dev Potato Std. Dev Wheat Value of One Futures Unit Date 2021/3/27 2021/3/28 2021/3/29 2021/3/30 2021/3/31 0.976974053 0.028410828 0.028575191 2021/4/1 2021/4/2 2021/4/3 2021/4/4 $50 Remember, the purpose of hedging isn't to make a profit but to protect yourself from any adverse price movements - you're sacrificing potential upside gain to protect downside loss *Hint: You need to work out the optimal hedge ratio and number of contracts first (you cannot buy partial contracts) - you should round to the closest whole number of contracts. Cumulative Futures P/L ($) Hedged Position Value ($) Closing Spot Price Potato (per ton) $595.24 $605.22 $609.62 $608.44 $591.50 $593.79 $585.93 $581.59 $540.21 Min Variance Hedge Ratio Number of Contracts Potato Position Value ($) $3,500,000 Closing Future Price Wh 792.153 805.0515033 812.6975497 811.519461 787.1511964 791.4660727 779.9605593 775.0501796 735.9239093 Part C: Hedging an underlying asset using futures Sharon is a potato farmer who wants to sell her potatoes in 20 days. She is concerned about adverse price changes over the next 20 days and wishes to hedge Sharon decides to cross hedge her position worth $3,500,000 TODAY using futures on wheat - the correlation between potatoes and wheat is 0.98. Using the following information, construct a hedge for Sharon: Correlation Std. Dev Potato Std. Dev Wheat Value of One Futures Unit Date 2021/3/27 2021/3/28 2021/3/29 2021/3/30 2021/3/31 0.976974053 0.028410828 0.028575191 2021/4/1 2021/4/2 2021/4/3 2021/4/4 $50 Remember, the purpose of hedging isn't to make a profit but to protect yourself from any adverse price movements - you're sacrificing potential upside gain to protect downside loss *Hint: You need to work out the optimal hedge ratio and number of contracts first (you cannot buy partial contracts) - you should round to the closest whole number of contracts. Cumulative Futures P/L ($) Hedged Position Value ($) Closing Spot Price Potato (per ton) $595.24 $605.22 $609.62 $608.44 $591.50 $593.79 $585.93 $581.59 $540.21 Min Variance Hedge Ratio Number of Contracts Potato Position Value ($) $3,500,000 Closing Future Price Wh 792.153 805.0515033 812.6975497 811.519461 787.1511964 791.4660727 779.9605593 775.0501796 735.9239093

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Part A Hedging Potato Crop with Wheat Futures Sharons Potato Hedge 1 Minimum Variance Hedge Ratio H H Correlation coefficient Std Dev of Potato Std De... View the full answer