By market convention, which of the following currencies are not quoted in terms of 'direct quotes' versus the USD?
A corn farmer has committed to sell 20,000 bushels of corn in November. The spot price has a standard deviation of 20 cents per bushel, and its correlation with the December futures prices is 0.9. The futures contract is for 5000 bushels and has a standard deviation of 24 cents per bushel. What should the corn producer do if he/she wishes to hedge the risk of price movements between now and November?
The annual borrowing rate for investors is 10% per annum. What is the par no-arbitrage futures price for delivery one year hence for a stock currently selling in the spot market at $100 ? Assume the stock pays no dividends.
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]
A company that uses physical commodities as an input into its manufacturing process wishes to use options to hedge against a rise in its raw material costs. Which of the following options would be the most cost effective to use?