University | National University of Singapore (NUS) |
Posted on: 5th May 2023
Derivatives & Risk Management Report, NUS, Singapore Your instructor will use 1.5-2 hours to go through the task, elaborate on the basic specs of Energy’s future
- Your instructor will use 1.5-2 hours to go through the task, elaborate on the basic specs of Energy’s future products, explain the trading rules, and demonstrate how to trade. You can start trading after the instructor’s demonstration.
- Your trading is to primarily hedge your risk exposure to the oil price. Assume you are treasurer at an airline company, and you are going to buy 10,000 barrels of jet fuel oil in 3 months. You aim to use Energy’s future products to hedge your price risk. Record the fuel price when they start to take positions on CME, to
1) provide background info about/justify how many contracts you go long/short,
2) show whether you succeed in hedging risk. - You have $100,000 USD cash on hand at the beginning of your trading. You must use at minimum 70% of your account balance to hedge your oil price risk. Meanwhile, you are allowed to have up to 30% of your account balance to speculating/arbitraging, and the speculation/arbitrage products are not limited to Energy futures.
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