I'm new to the site and this is the only forum where I've seen people asking questions on the exam material and actually getting a response. This is what I hope to get out of this forum. Hopefully I'll be able to get some help and also give it to others. Anyways, onto my question:
Why is this true? I do not understand the following statement:
A short position in an equity forward could not hedge the risk of a purchase of that equity in the future.
A qualitative as well as a quantitative example would help a lot.作者: eoin 时间: 2011-8-12 12:46
Where'd you get this from?作者: Carson 时间: 2011-8-12 13:02
hummm, short means sell, I remember them via the S
so if you sold a forward you are obliged to deliver the equity at expiration.
so you are hedged against an undesirable sell price and not a purchase price.
helps ?作者: zbird2134 时间: 2011-8-12 13:18
i forgot that your at Level I, so you may need the numeric example likeyou said
I short an equity forward on non div paying XYZ stock, expiration is in 1 month and forward price is 100$
the forward price is used to refer to the amount of money that must be paid at expiray
the spot priced is used to refer to the price of the equity at this moment
____
so in one month i will deliver stock XYZ and get 100$ in return, if its spot price at that time is 50$, i dontcare i still get my 100$
it the spot price is 200, i still only get a 100$
however my position has nothing o do with hedging a purchase, the person on the oposite side of thi transaction is the one hedged to purchase, that would be the person paying me 100作者: mp3bu 时间: 2011-8-12 13:34
Sorry for getting back to you guys late. Thanks for all the input!
Edited 1 time(s). Last edit at Friday, August 5, 2011 at 07:53PM by jonathankyim.作者: kickthatcfa 时间: 2011-8-12 13:50
OK thanks for the example. I think it makes sense now 作者: jcfa2011 时间: 2011-8-12 14:22
This is one of the answers for a concept checker in CFA Level 1 Schweser Study Notes. Forget which page though...
JonnyKay Wrote:
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> Where'd you get this from?
