Formulate a Hedged$-$Portfolio $($per slide $35,$ write the equation in the box$)$ in each

of the following pair$/$arbitrage trading strategies:

a$)$ Commodity pair: Henry Hub Natural Gas Spot Price and West Texas Intermediate $($WTI$),$

b$)$ FX Pairs: The FX$-$rates pairs between USD, EUR, and GBP

c$)$ Interest Rates: The $6$M$-$Libor$3$M$-$Swap and the two forward rates: $3$m$-$Libor$3$M$,$ and $6$m$-$Libor$3$M$.($You may assume the discounting rate is constant.$)$Interpretation

Express the observed price in terms of spread from a "True" Price:

If the P&L obtained from a Strategy $"$S$"$ be expressed as: Decisions unique to risk$-$factor$-$paths$\}$

However, if:

Then:

Consider Hedging:

Then if $($for all $t)$:

Then we can say:

Two types:

Trend $($Moving Average$)$ or

Mean$-$Reversion $($RSI$,$

Oscillators etc.$)$

Think about the mix carefully $...$