The spot price for smoked salmon is $5,000 per ton and its six-month futures price is $4,800. The monthly interest rate is .0025 (.25%). What is the average monthly net convenience yield on smoked salmon for the next six months? 2. If you are a manager of Bread&Circus and need 10 tons of smoked salmon in six months. How can you avoid the risk in the price of smoked salmon over the next six months using futures? 3. Suppose that your net convenience yield for smoked salmon is 1.2%. How does this change your hedging strateg
Macrohedging
Hedging or hedge accounting is a risk-mitigation technique used to protect the current financial position from potential losses. Hedging is often confused with speculating. The major difference between the two is that hedging does not involve guessing, whereas speculation is based on guessing the direction of movement of the underlying asset to book profits.
Finance Mathematics
The area of applied mathematics known as mathematical finance, also known as quantitative finance or financial mathematics is concerned with the mathematical modeling of financial markets. The application of mathematical methods to financial problems is known as financial mathematics. A financial market is a place where people can exchange low-cost financial securities and derivatives. Stocks and bonds, raw materials, and precious metals, both of which are regarded as commodities in the stock markets, are examples of securities. It uses probability, statistics, stochastic processes, and economic theory as methods.
The spot price for smoked salmon is $5,000 per ton and its six-month futures price is $4,800. The monthly interest rate is .0025 (.25%).
What is the average monthly net convenience yield on smoked salmon for the next six months? 2. If you are a manager of Bread&Circus and need 10 tons of smoked salmon in six months. How can you avoid the risk in the price of smoked salmon over the next six months using futures? 3. Suppose that your net convenience yield for smoked salmon is 1.2%. How does this change your hedging strateg
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