Math/Physic/Economic/Statistic Problems
Determine the payoff of those option positions at the expiration of the contracts. With the benefit of hindsight, what would have been the best strategy that the company should have followed?
[5 marks]
Assuming a flat interest rate term structure of 3% for each of the next 12 months,calculate the swap rate for a 12-month fixed for floating swap.
Briefly discuss what other risks are involved in using a series of forward or a swap contract to hedge your bunker exposure in this case
Given the Baltic Assessments for 2 quarters ahead FFAs for Average 5TCs of Capesize and 4TC of Panamax (5TC_C+2Q and 4TC_P+2Q) from 2 Jan 2018 to 7 June 2022 in Excel worksheet “BFA CSZ & PMX”,
Estimate the Rolling Volatility (annualised standard deviation) of the series using a 62-day window.
Estimate the Exponentially Weighted Average Volatility (RiskMetrics approach) for the series over the same period as in part a), and plot the two volatilities, assuming l=0.94.variance
Estimate and plot the 1%-5day VaR for the two FFA prices from 8 June 2021 to 6 June 2022, using the Exponentially Weighted Average Volatility, and 250 days Historical Simulation.
Estimate the 1%-5day VaR for a portfolio of long 1 Cape 5TC+2Q and short 2 Panamax 4TC+2Q contracts from 7 June 2021 to 6 June 2022.