Question: Trader A takes a short position in a 90-day forward contract on 1 million British pounds. Trader B takes a short position in a 90-day

Trader A takes a short position in a 90-day forward contract on 1 million British pounds. Trader B takes a short position in a 90-day futures contract on 1 million British pounds. The forward price is 1.600 $/GBP. The futures price is also 1.600 $/GBP. At the end of 3-month period, exchange rate is 1.654 $/GBP.

• What is the gain/loss realized by Trader A?

• What is the gain/loss realized by Trader B?

• When does trader A realize the gain/loss?

• When does trader B realize the gain/loss?

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