Fixed rate payer in swap as risk management technique

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Reference no: EM131570521

1. What is an optimal hedge and how do we calculate it? Compute the number of contracts we need in the hedge. How do we decide if we should implement the hedge? Why? Explain in detail.

Suppose you have a long cash position 200,000 ounces of gold. One gold futures contract is 100 troy ounces.

Δ Gold Price= 0.60 + 0.66 (Δ Gold Futures Price) + ε , R2=0.48

2. Compare and contrast selling Eurodollar futures and being a fixed rate payer in a swap as a risk management technique. Explain in detail.

3. What is a long only commodity fund, describe its main features. Long only commodity fund have generated returns similar to diversified equity funds. What are the components of the returns from a long only commodity fund? Are commodities a separate asset class? Discuss in detail.

Reference no: EM131570521

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