Sir, what I think is that if spot price rises by $1, each future price will rise by $1/(beta)=(1/.68)=$1.467. So, with 1000000 gallons of the underlying asset, price rise of asset will rise $1000000 and price rise of 16.25 futures contracts with each having 42000 gallons will be=$16.25*42000*1.467=1000000 (approx), which is balanced by asset price change. I am not sure why you mentioned that price rise of each futures will be 1/(.81^2) rather than 1/.68. Please clarify
As student, these presentations are impeccable at testing my insights. However I have a question, what is the nuance between the hedge ratio for the percentage of changes VS the actual changes in price. Thank you
Thank you for this video, it helped me out a lot. However, if the price of jet fuel falls by $1, our long positions in our futures contract would give us the identical profit but as a loss. If, for example, our margin requirement was 10%, we would have $102,800 in our account. If the price would fall by $4, that would be enough to trigger a margin call. Is this correct?
I have a question. What prices would I use for the futures prices? Would I use historical data on actual future contracts on heating oil (from a source such as Nymex) and compare them to historical spot prices on jet fuel. And if so - aren't there many different kinds of future contracts on heating oil, which ones would I use, 1 year ? or... Would I use historical heating oil spot prices and compare them to historical jet fuel spot prices.
Hey, I’ve tried to calculate the optimal no. of contracts when i want to hedge jet fuel. This time i’ve tried to use two different commodities and calculated the hedge ratio and number of contracts with both of them, but i’m really confused which one should i use and why?
one of the best explanations!! thank you so much !!!
This has helped me understand the cross hedge formula that I need for my paper. Thank you so much.
Great explanation. Outstanding work David!
Sir, what I think is that if spot price rises by $1, each future price will rise by $1/(beta)=(1/.68)=$1.467. So, with 1000000 gallons of the underlying asset, price rise of asset will rise $1000000 and price rise of 16.25 futures contracts with each having 42000 gallons will be=$16.25*42000*1.467=1000000 (approx), which is balanced by asset price change. I am not sure why you mentioned that price rise of each futures will be 1/(.81^2) rather than 1/.68. Please clarify
Dear Lord you saved me.I wish i read your comment before putting too much effort to realize if i did something wrong with calculations.Thank you.
As student, these presentations are impeccable at testing my insights. However I have a question, what is the nuance between the hedge ratio for the percentage of changes VS the actual changes in price.
Thank you
Amazing video sir. Would you know where i could find the corrections to John Hull's practice questions? Thank you in advance.
Thank you for this video, it helped me out a lot. However, if the price of jet fuel falls by $1, our long positions in our futures contract would give us the identical profit but as a loss. If, for example, our margin requirement was 10%, we would have $102,800 in our account. If the price would fall by $4, that would be enough to trigger a margin call. Is this correct?
Great and succinct tutorial! Thanks!
Thank you for watching!
Very informative. Thank you for posting it!
How to derive it
Very helpful, can you tell me in the last section working out the Futures Price gain why you raised it to the second power?
That's so helpful. Thank you!
I have a question. What prices would I use for the futures prices? Would I use historical data on actual future contracts on heating oil (from a source such as Nymex) and compare them to historical spot prices on jet fuel. And if so - aren't there many different kinds of future contracts on heating oil, which ones would I use, 1 year ?
or...
Would I use historical heating oil spot prices and compare them to historical jet fuel spot prices.
great information but please make clear number of trade and number of contract ,
Hey, I’ve tried to calculate the optimal no. of contracts when i want to hedge jet fuel. This time i’ve tried to use two different commodities and calculated the hedge ratio and number of contracts with both of them, but i’m really confused which one should i use and why?
Hahahaha... lmao
This is amazing thank you!
Thank you so much, this is really helpful!
You're welcome! Thank you for watching :)
Can I use the real prices or I must put the changes??? Or it}s no the same
Awesome video thx!
Thank you for watching!
thanks dude that was helpfull. cheers from sydney
gosh i am having an "ahaaah!" moment watching this video, you are a life saver...yhank you
Thanks!
super duper
Thanks a lot, John book is horrible in explaining
for shizzel my nizzel