Obligation in purchasing a futures contract, what kind of hedge
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Suppose that you purchase a Treasury bond futures contract at $95 per $100 of face value.
a. What is your obligation when you purchase this futures contract?
b. If an FI purchases this contract, in what kind of hedge is it engaged?
c. Assume that the Treasury bond futures price falls to 94. What is your loss or gain?
d. Assume that the Treasury bond futures price rises to 97. Mark your position to market.
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Solution Summary
This solution explores purchasing a treasury bond futures contract at face value.
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Answer:
Given that,
Treasury bond contract price=$95
Par value of Treasury bond=$100
(a) If I purchase the contract the I have an obligation to purchase the Treasury bond ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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