F. Hedging with Futures (continued)

• 3. To hedge the loan the Hedge Position is determined by:

  • $50,000,000/100,000 = 500 futures contracts= 1:1 Hedge

• 4.At a price of 67-17 for December contracts the total value would be:

  • $67,531.25/contract * 500 = $33,765,625

• But the total cost to control these assets is margin/contract times 500.

  • $2000 * 500 = $1,000,000

Previous slide

Next slide

Back to first slide

View graphic version