Suppose that as part of a stack hedging strategy, you enter a short position of one...
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Suppose that as part of a stack hedging strategy, you enter a short position of one unit in a forward contract that will need to be rolled over at T₁ = 9 months from today. The current spot asset price is So 50. Assume that the CAPM holds. The risk-free rate is RF 3%, the expected return on the market is E[RM] = 8%, and the beta of the asset is = 1.0. These numbers are in annual terms and returns are continuously compounded. There are no storage costs or convenience yields. = = What is the expected rollover profit on the short position in the forward contract at T₁? (Enter a positive number when you expect to make a profit, a negative number when you expect to make a loss.) Use 2 decimal places for your answer. Suppose that as part of a stack hedging strategy, you enter a short position of one unit in a forward contract that will need to be rolled over at T₁ = 9 months from today. The current spot asset price is So 50. Assume that the CAPM holds. The risk-free rate is RF 3%, the expected return on the market is E[RM] = 8%, and the beta of the asset is = 1.0. These numbers are in annual terms and returns are continuously compounded. There are no storage costs or convenience yields. = = What is the expected rollover profit on the short position in the forward contract at T₁? (Enter a positive number when you expect to make a profit, a negative number when you expect to make a loss.) Use 2 decimal places for your answer.
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