Question 3 : Commodity Swaps ( 2 / 1 0 ) Suppose you are buying 1 0
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Question:
Question : Commodity Swaps Suppose you are buying barrels of oil
every year for years ie the first purchase is at the end of first year, and second is at the
end of second... The spot price for oil now the start of first year is S $ the lease
rate of oil is and the interest rate is annual continuously compounding
i If you are using multiple forward contracts to purchase oil, what should you do and
what are the forwards prices?
ii If you are using a swap contract, what should you do and what is the swap price each
year?
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