QUESTION 2 (25 MAR
Posted: Sat Nov 27, 2021 5:18 pm
QUESTION
2
(25 MARKS)
Mr Joseph is a millionaire, and being announced as the top 3 the
richest people in Malaysia in 2020. He has a lot of businesses
domestic and abroad. He went to your company to get an advice how
to protect his portfolio from instability of the market currently.
He wants you to manage his portfolio worth RM100 million. You
advise him to hedge in the futures market in and you are bullish in
the near future. You believed that when the government opened all
the economy sectors and encourage for the tourism, people can
inter-state, it will recover the economic slowly until early of
next year. The people will start demanding and the money
circulation in the market would be increased.
You interested to hedge between now (October) and March 2021 for
1700 contracts in the futures market. Assume when you close the
position in March 2021, both markets are declining by 0.8%.
Besides, you want to long call option for AA stock for three months
at exercise of RM23 per share and the premium is RM2 per share. In
addition, you long put option for ZZ stock for three months at
exercise price of RM15 per share and the premium is RM1.10 per
share. Both options initiates on 2nd October 2021.
Assume after one month, both stocks are declining by 5% and
after 2 months the price increase by 10% and upon maturity the
price increase to RM30 for AA stock and RM20 for ZZ stock.
Required:
(4 marks)
(CLO2:PLO2:C6)
(8 marks)
(CLO2:PLO2:C6)
(8 marks)
(CLO2:PLO2:C6)
(5
marks)
(CLO2:PLO2:C6)
2
(25 MARKS)
Mr Joseph is a millionaire, and being announced as the top 3 the
richest people in Malaysia in 2020. He has a lot of businesses
domestic and abroad. He went to your company to get an advice how
to protect his portfolio from instability of the market currently.
He wants you to manage his portfolio worth RM100 million. You
advise him to hedge in the futures market in and you are bullish in
the near future. You believed that when the government opened all
the economy sectors and encourage for the tourism, people can
inter-state, it will recover the economic slowly until early of
next year. The people will start demanding and the money
circulation in the market would be increased.
You interested to hedge between now (October) and March 2021 for
1700 contracts in the futures market. Assume when you close the
position in March 2021, both markets are declining by 0.8%.
Besides, you want to long call option for AA stock for three months
at exercise of RM23 per share and the premium is RM2 per share. In
addition, you long put option for ZZ stock for three months at
exercise price of RM15 per share and the premium is RM1.10 per
share. Both options initiates on 2nd October 2021.
Assume after one month, both stocks are declining by 5% and
after 2 months the price increase by 10% and upon maturity the
price increase to RM30 for AA stock and RM20 for ZZ stock.
Required:
(4 marks)
(CLO2:PLO2:C6)
(8 marks)
(CLO2:PLO2:C6)
(8 marks)
(CLO2:PLO2:C6)
(5
marks)
(CLO2:PLO2:C6)