BUS 316 Chapter Notes -Spot Contract, Cme Group, Futures Contract
21 Jun 2013
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Homework #1 (due in class may 27, 2013) Compare the similarity and difference between a future and a forward. Go to cme group website to find out the contract specification of corn futures. Start from the link: http://www. cmegroup. com/trading/agricultural/ ; then go to corn futures , then contract specifications . Find out the following items: 1) contract size; 2) deliverable grade of underlying asset; 3) unit of price quoted; 4) available delivery month. You signed a deal with a customer to sell her 2000 pounds of cattle on december 1 for the spot price then. You decide to use 2-month delivery cattle futures contracts to hedge the price fluctuation of cattle. Each futures contract underlying 1000 pounds of cattle. What is your income realized from selling the cattle with the hedge: now we consider margin requirement of the futures contract. Suppose the initial margin required is per contract. And the maintenance margin is per contract.
