calculation finance question

Anonymous

Question description

1- Consider the following:
(a) Consider a 6-month futures contract on brent crude oil. Assume that it costs 3% of the price of brent crude oil to store a barrel of oil, and the payment is made at the end of the 6 months. If the spot price is \$20 and the risk-free rate is 2%, then what is the value of a 6-month crude oil futures contract?
(b) The spot price of an ounce of silver is \$350, and the risk-free rate is 1.5%. If the cost of storage is 2.5% of the purchase price, and the lease rate of silver is 0.5%, what is the value of a 3-month futures contract?

2- Consider the following:
The most recent estimate of the daily volatility of an asset is 1.5%, and the price of the asset at the close of trade yesterday was £30. The parameter, ?, in the EWMA model is 0.94. Suppose that the price of the asset at the close of trading today is £30.50. How will this cause the volatility to be updated by the EWMA model?

3- Assume that the FTSE 100 at close of trading yesterday was 6,200, and the daily volatility was estimated as 1% per day at that time. The parameters in a GARCH (1,1) model are ?=0.000002, a=0.06, and ß=0.92. If the level of the index at close of trading today is 6,220, what is the new volatility estimate?

l7___alternative_asset_classes.pptx
l8___asset_price_volatility.pptx

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