Speculator Futures Position - ANZ banking - Accounting Assignment Help

Assignment Task :

Question 1
A speculator buys five March 2020 copper futures contracts on COMEX on 15 January 2020 at a price of US$2.8655 per lb and buys a further five March 2020 copper futures contracts on 30 January 2020 at a price of US$2.5280 per lb. The speculator closes out her long futures position on 12 February 2020 at a price of US$2.5975 per lb. The COMEX copper futures contract is written on 25,000 lbs of copper. For a speculator, COMEX sets the maintenance margin at US$2,700 per contract and the initial margin at 110% of the maintenance margin.

(a) At the time the initial futures position is established, what is the minimum price movement that will generate a margin call?
 
(b) Complete Template A showing the daily marking-to-market (and finalsettlement) of the speculator’s futures position. This template is similar in format to Table 2.1 on page 30 in your textbook. Enter the appropriate figures or formulae only in cells that have been shaded grey. Do not make any changes to the format of Template

Question 3
A corporate treasurer is contemplating buying a five-month down-and-out put option on the Australian dollar with an exercise price equal to the current spot rate of the Australian dollar of USD0.7200 and a barrier at USD0.6000. Her treasury analyst estimates that the Australian dollar will either rise or fall by 5% during each one- month period. The term structure is flat in both Australia and the US, with risk free rates of 1.5% and 0.5% p.a. respectively, continuously compounded.
 

Required
(a) Build a five-period binomial model in EXCEL to price the down-and-out put option. Make sure you include a binomial tree diagram for the exchange rate.
(b) Compare the price of the down-and-out put option with that of a standard European put option priced using a five-period binomial model. Account for the difference in price.

Question 3
On 3 March 2020, five-year credit default swaps (CDS) on the senior US dollardenominated debt of ANZ Banking Group were trading at 39.39 basis points, up from 25.55 basis points on 20 February 2020. These prices assumed a recovery rate of 40% on the debt of the reference entity.
 

Required
(a) Build an Excel model to estimate the implied probability of ANZ defaulting during a year conditional on no earlier default, as at 3 March 2020. You should assume that defaults always occur at mid-year, triggering an accrual payment, and that premium payments on the CDS are made once a year at the end of the year. The swap curve is flat in Australia, with swap rates of 2.0% p.a., continuously compounded, at all maturities.
(b) Why did CDS prices rise between late February and early March 2020?
 
 

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