MGRM chose to hedge this exposure by using offsetting long positions with gasoline‚ heating oil‚ and crude oil futures on NYMEX. It’s important to note that the magnitude and complexity of contracts for MGRM made it difficult to hedge this position. One of the complicating factors for MGRM was that although these contracts had the same term‚ the details of delivery varied per contract. Some contracts stated monthly‚ and others stated longer term delivery. MGRM was also only able to hedge 55 million
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assured of a reasonable return. In this case‚ he would enter into a futures contract from the short side. Now‚ the efficiency of the hedge depends on 2 things: the underlying asset and the time to maturity for the futures contract and these should correspond to the farmer’s produce and the harvesting period. What we have discussed here is a short hedge. Similarly‚ a long hedge will be used when the party intends to buy a certain asset in the future and wants to reduce risk of rising prices. Basis Risk
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dollar causes a given amount of yen to convert to fewer dollars in the future. This loss of value could be severe if the yen depreciates by a significant amount. b. If Intel chooses not to hedge its transaction exchange risk‚ what is Intel’s expected dollar revenue? Answer: If Intel chooses not to hedge‚ the expected dollar revenue is the expected dollar value of the ¥100‚000‚000. The expected spot rate incorporates a 1% weakening of the dollar. This means that the expected yen price of the
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1.What are conversion factors? Why were conversion factors developed? How do they impact on which bond is cheapest to deliver? Under what conditions would there be no cheapest to deliver? Explain in detail. The conversion factor‚ for any particular bond deliverable into a futures contract is a number by which the bond future delivery settlement price is multiplied‚ to arrive at the delivery price for that bond. Conversion factor relates all outstanding deliverable government bonds and notes
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cruel or evil. It is important because the reader needs to find what Hedges’ is trying to argue with. Chris Hedge may be misusing the word artifice‚ and it doesn’t necessarily make sense on what his argument is trying to say. When Hedges’ argument says “ The most essential skill… is artifice.” Which part of the paragraph do you think is the artifice part. What make sense or adds up to what Hedges’ is trying to say. Identify what Hedges’ point is‚ and write down what artifice is to you. As in how would
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Introduction: Audit emerges because society needed. Auditing has been a regular feature of organized human activity from the earliest times. Indeed evidence suggests that formal audit procedures existed in the economic activities of the most of the early civilization. With the advancement of development‚ audit emerges as a separate discipline & contributes to the economic & social advancement. Audits serve a vital economic purpose and play an important role in serving the public interest to strengthen
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The Strategic HRM Diagnostic Model (Stone‚ 2002:26) attempts to provide Human Resource Managers with an analytical framework designed to assist in the prediction and prevention of possible problems. The approach encourages HR managers to be pro-active‚ and to consider the nature of the internal and external environments before pursuing a particular course of action (Stone‚ 2002:25). The influences of the environments span all activities of Human Resource Management and this essay explores those
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1. J & L should hedge only some of its exposures to diesel fuel. Although there are several financial instruments available for J & L to hedge against the risk of rising diesel fuel prices‚ these instruments still have their own downsides and possibly their own risks. For example‚ the future contracts from NYMEX seems like an effective hedging strategy for J &L‚ but there are some difficulties in terms of using futures from NYMEX to hedge against the diesel prices. NYMEX does not trade
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hedging strategies that the Controller should become familiar with are cash flow hedges and fair value hedges. Cash flow hedges relate to forecasted transactions where the effective portions of the hedge is initially reported in other comprehensive income and are later reclassified into earnings any portion of the hedge that is ineffective is reported currently in earnings (FASB ASC 815-30‚ 2010). Fair value hedges can be associated with
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instruments. When do the alternative hedging approaches produce the same result? Answer: Hedging transaction exposure by a forward contract is achieved by selling or buying foreign currency receivables or payables forward. On the other hand‚ money market hedge is achieved by borrowing or lending the present value of foreign currency receivables or payables‚ thereby creating offsetting foreign currency positions. If the interest rate parity is holding‚ the two hedging methods are equivalent. 3. Discuss and
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