From: mapil
Affiliation:
Address:
Date: 12 Oct 2004
Time: 22:26:17
Would like to ask for your advice on the followings:
The following are givens:
1) Column A has the last market date of the month for 200 recent months.
2) Columns B and C give you prices for two unknown financial assets, X and Y.
3) Column D is the annualized 1-month continuously compounded risk-free rate for each date.
4) Column E describes Days per month.
5) Column F is month's risk-free rate.
6) Assume that the forwards expire on the last trading day of each month. You may also assume that neither asset pays dividends.
7) Use column I to calculate your $ profits if you had taken a $1 million short position in 1-month forward contracts on asset X on each date.
8) Use column J to calculate your $ profits for taking a $1 million long position in 1- month forwards on asset Y for each date. (Hint: as a start, determine the number of contracts on each date that is equivalent to a $1 million position.)
Q1) What is your formula in columns I and J? What is the mean and standard deviation of columns I and J?
Please advise on what could be the solution for above question. Thank you in advance. Detailed explanation is highly appreciated.