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发表于 2010-4-21 15:23 | 只看该作者

Reading 59: Futures Markets and Contracts-LOS f 习题精选

class, div, following, expected, whether
Session 16: Derivative Investments: Forwards and Futures
Reading 59: Futures Markets and Contracts

LOS f: Discuss whether futures prices equal expected spot prices.

 

 

 

Which of the following best defines normal contango? Normal contango is when the futures price lies:

A)
 above the expected future spot price and the futures price rises over the life of the contract.
B)
 below the expected future spot price and the futures price falls over the life of the contract.
C)
 above the expected future spot price and the futures price falls over the life of the contract.


 

A pattern of falling futures prices is known as normal contango. This situation occurs if hedgers are net long.

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土豆妮

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2#
发表于 2010-4-21 15:23 | 只看该作者

Which of the following is TRUE in normal backwardation? Futures prices tend to:

A)
 rise over the life of the contract because speculators are net long and have to receive compensation for bearing risk.
B)
 rise over the life of the contract because hedgers are net long and have to receive compensation for bearing risk.
C)
 fall over the life of the contract because hedgers are net short and have to receive compensation for bearing risk.


Normal backwardation means that expected futures spot prices are greater than futures prices. It suggests that when hedgers are net short futures contracts, they must sell them at a discount to the expected future spot prices to get speculators to assume the risk of holding a net long position. The futures price rises over the life of the contract, which compensates speculators for the exposure of their long positions.

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土豆妮

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3#
发表于 2010-4-21 15:23 | 只看该作者

Under the view that futures transfer risk from asset holders to futures buyers, the:

A)
 futures price will be less than the expected future spot price.
B)
 expected asset price in the future will be less than the futures price.
C)
 convenience yield is positive.


Under the view that futures transfer risk from asset holders to futures buyers, the futures price will be less than the expected future spot price. The longs (speculators) must be compensated for bearing asset price risk by receiving a lower future purchase price for the asset.

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4#
发表于 2010-4-21 15:24 | 只看该作者

What is the situation called when a futures price continuously increases over its life because most hedging strategies are short hedges?

A)
 Normal backwardation.
B)
 Contango.
C)
 A normal market.


Normal backwardation means that expected futures spot prices are greater than futures prices. It suggests that when hedgers are net short futures contracts, they must sell them at a discount to the expected future spot prices to get investors to buy them. The futures price rises as the contract matures to converge with spot prices.

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5#
发表于 2010-4-21 15:24 | 只看该作者

The theoretical question of whether futures prices are unbiased predictors of future spot rates focuses on:

A)
 whether futures buyers are taking on asset owners’ price risk.
B)
 whether futures markets are efficient.
C)
 the correlation between interest rate changes and asset price changes.


The theoretical analysis of whether futures prices are unbiased predictors of spot rates at futures expiration dates depends on whether futures buyers are being compensated for taking on the asset price risk that futures sellers are avoiding. Under the assumption that futures transactions are driven by those with natural short price risk transacting with those who have natural long positions, expected future spot prices are equal to futures prices.

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6#
发表于 2010-4-21 15:24 | 只看该作者

Under the view that futures markets are primarily a mechanism for short hedgers and long hedgers to offset their respective asset price risks:

A)
 futures prices will be unbiased predictors of future spot rates.
B)
 forward prices will be greater than futures prices.
C)
 expected future asset prices are less than the futures prices.


Under the view that futures markets are primarily a mechanism for short hedgers and long hedgers to offset their respective risks, futures prices will be unbiased predictors of future spot rates.

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7#
发表于 2010-4-21 15:24 | 只看该作者

Suppose the soybean market is in backwardation with a cash price of $6.50/bushel and a futures price of $6.00/bushel. Also assume that a trader owns 5,000 bushels of soybeans and does not need the soybeans until after futures expiration. Which of the following is the best strategy for the trader?

A)
 Do nothing since the convenience yield is so high.
B)
 Sell the soybeans in the spot market, buy an appropriate futures, and profit $2,500.
C)
 Sell the soybeans in the spot market, buy an appropriate futures, and profit $1,250.


Since the trader does not need the soybeans now he should monetize the convenience yield by selling in the spot market and simultaneously buy soybean futures for his later needs. The total profit is computed as follows:

Total profit = (Cash Price ? Futures Price) × Amount = ($6.50 ? $6.00) × 5,000 = $2,500.

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