Commodity Maths Latest Version

7/28/2019 Commodity Maths Latest Version

1/50

Qn 17

(a) Details

Cont Comp

rate

Spot 1,400 Future 1,477.01

Period (mths) 6W/House rent pa 200 13.35% 1,477.01

ROI % 12.0% 11.33%

Conveniecen Yield 15.0% 13.98%

Qn

17(b) Details

Cont Comp

rate

Spot 2,600 2,521 Future

Period (mths) 1 1 2,552.43

79 Dividend (80) 6 2,715.26

ROI % 16.0% 14.84% 12 2,924.42

Qn 21 SD of Mthly Changes in Spot 1.8 h 1.8 * 0.8 / 2.1

SD of Mthly changes in Future 2.1 h 0.686

Correlation coeff 0.8 Tailed Hedg 0.68 *1500 / 1750

Period Mths 3 Ratio 0.588

Optimal Hedge Ratio

Spot Price 1,500 1% * s / Future Price 1,750

What is Tailed Hedge Ratio

Period S F (S- s) (F-f) (S- s)

1 130.0 (80.0) 78.5 (84.5) 6,162.3

2 390.0 440.0 338.5 435.5 114,582.3


2/50

3 (90.0) (310.0) (141.5) (314.5) 20,022.3

4 (100.0) (260.0) (151.5) (264.5) 22,952.3

5 (210.0) (310.0) (261.5) (314.5) 68,382.3

6 240.0 420.0 188.5 415.5 35,532.3

7 75.0 15.0 23.5 10.5 552.3

8 (420.0) (440.0) (471.5) (444.5) 222,312.3

9 180.0 330.0 128.5 325.5 16,512.310 320.0 240.0 268.5 235.5 72,092.3

Sum 515.0 45.0 579,102.5

Average 51.5 4.5 57,910.3

0.1 Contracts 20 2054Period Date Spot Future P&L Day P&L Upto day Margin

1 1-Mar-11 1,025.0 1,027.0 2,054.0

2 2-Mar-11 1,017.0 1,030.0 (60.0) (60.0) 1,994.0

3 3-Mar-11 1,002.0 1,020.0 200.0 140.0 2,194.0

4 4-Mar-11 997.0 1,009.0 220.0 360.0 2,414.0

5 5-Mar-11 1,008.0 1,010.0 (20.0) 340.0 2,394.0

6 6-Mar-11 989.0 1,003.0 140.0 480.0 2,534.0

7 7-Mar-11 985.0 992.0 220.0 700.0 2,754.0

8 8-Mar-11 977.0 984.0 160.0 860.0 2,914.0

9 9-Mar-11 955.0 959.0 500.0 1,360.0 3,414.0

10 10-Mar-11 969.0 945.0 280.0 1,640.0 3,694.0

Sum

Average


3/50


4/50

F =

Date Price Days ROI % F

Spot Dat 9-Feb-11 22,690

Future E 14-May-11 25,300 0.26 23,579

Future E 28-Mar-11 22,900 0.13 23,130

Opportunity cost of capital 8.50% 8.16%

Warehousing cost 7.00% 6.77%

94.0

47.0

3.435 100

Int rate Period FV (Cont co PV factor PV of Intt Pv of Pincipal

5.00% 0.50 1.0253 0.9753 3.3502

5.80% 1.00 1.0597 0.9436 3.2414

6.40% 1.50 1.1008 0.9085 3.1206

6.80% 2.00 1.1457 0.8728 2.9982 87.2843

12.7104 99.9947

S * e +


5/50

E 0.1* E 0.11 E2*0.105

1.0 0.1000 1.1052

2.0 0.1100 1.2337 0.1050

3.0 0.1200 1.3910 0.1100

4.0 0.1300 1.5841 0.1150

5.0 0.1400 1.8221 0.1200

6.0 0.1500 2.1170 0.1250

7.0 0.1600 2.4843 0.1300


6/50

eb

Qn 18 15-Jan-11 15-Mar-11 Rate

Contr

Maturity

Date

ROI 13.0% 16.0% 15-Jul-11

Forward Price 1,420 1,490

of 6 mths 70.00 122

66.61

Qn 19 S1-S0

Feb spot 51,000 From Feb

Mthly

Progressive

April Futures 52,010 2.0 11.77%

May Futures 51,800 3.0 6.23% -4.86%

June Futures 52,650 4.0 9.55% 19.53%

Cost of Capital 14.0% 13.10%

Risk free Rate 7.0% 6.77%

Qn 24 Delta S Delta F1 130 -80

2 390 440

3 -90 -310

4 -100 -260

5 -210 -310

6 240 420

7 75 15

8 -420 -440

9 180 330

10 320 240

515

51.5

(F-f)

(S-s)* (F-

f)

7,140.3 (6,633.3) s 57,910.3 s 240.6

189,660.3 147,416.8 f 99,632.3 f 315.6


7/50

98,910.3 44,501.8 Cov sf 70,080.8

69,960.3 40,071.8 0.9298,910.3 82,241.8 0.70

172,640.3 78,321.8 Min Hedge Ra h * s /f 0.70110.3 246.8

197,580.3 209,581.8 Portfolio 1,000.0

105,950.3 41,826.8 NIFTY level 1.055,460.3 63,231.8 NIFTY 1 contr size 20.0

Cost of Min lot 20.0

996,322.5 700,807.5 No of Contr for P/folio (norm) 50.0

99,632.3 70,080.8 No of cont for Min Hedge h * PF / Min 35.2

s 0.0 s 0.0

f 0.0 f 0.0Cov sf 0.0

#DIV/0!#DIV/0!

Min Hedge Ra h * s /f #DIV/0!

Portfolio 1,000.0

NIFTY level 1.0

NIFTY 1 contr size 20.0

Cost of Min lot 20.0

No of Contr for P/folio (norm) 50.0

No of cont for Min Hedge h * PF / Min #DIV/0!


8/50


9/50

F =

Date Price Days ROI %

Spot Date 9-Feb-11 7,683

Future Expiry 2 18-Mar-11 8,980 0.101

#REF!

Opportunity cost of capital 5.0% 4.9%

Warehousing cost 7.0% 6.8%

Comp freq Exp Rate Exp Rate

2 0.066869552 1.069156

4

S * e + -


10/50

2.0

11.6538% 11.3269% 111.9933%


11/50

Basics Continuous compounding

Relationship between spot & futures Relationship between spot and futures

Contango

Backwardation

Cost of CarryFull carry

Net carry

Convergence of spot and futures

Marginal convenience yield

Arbitrage Cash and carry arbitrage

Reverse cash and carry arbitrage

Hedging Basis

Basis risk

Hedge ratio

Effectiveness of hedge

Perfect hedge

Forwards Vs FuturesTailing a hedge

Trading Open interest

Maintenance Margin, Margin call, Variation

margin, Haricut

Margins on gross basis and net basis

Offsetting

MTM

Levered or Geared

Value at Risk

Delivery Multiplicative adjustment

Additive adjustment


12/50

2.19

2.19

2.18

2.18

3.16

3.23

1.133.24

1.39

1.23

1.25

1.18

1.19

1.3

1.45

1.33

1.33


13/50


14/50

Understanding 'e' and Natural Logarithm (Ln) e^rcn

e^rcn

Present Value 100 rc

Annual Rate 15.00% rm

Number of years 1

No.ofcompounding FVIF

FutureValue

Every Annual 1 1.15000 115.00

100*(1+0.15/2)^2 Every Half Year 2 1.15563 115.56

100*(1+0.15/4)^4 Every Quarter 4 1.15865 115.87

Every Month 12 1.16075 116.08

100*(1+0.15/365)^3 Every Day 365 1.16180 116.18

Every Hour 21,900 1.16183 116.18

100*(1+0.15/13140 Every Minute 1,314,000 1.16183 116.18

Continuous Compounding - Future Value

FV = PV(ekt) where the value of e = 2.718281828

1.161834243 15%

Continuous return : The rate of return that when componded continuously, causes an investment to

equal to 1 plus the periodic return. For example Re.1 invested for one year at an annualized continuou

9.53% will grow to Rs.1.10. The continuous return is equal to the natural logarithm of the quantity 1 plu

ln(1.15)= 13.98% e%13.98*1

= 1.1500

Compounding frequency


15/50

= (1+(Rm/m))^(mn)

= (1+(Rm/m))^(m)

= m*Log(1+(Rm/m))

= m*(erc/m -1)

1.0845

Spot Price 48

Future Price 49

Time in days 90

Ann.Rate 8.45%

Cont.Comp Rate 8.11%

48.97

1.161834243

row by a factor

return of

the periodic return.


16/50

Absolute Discrete

Formula

S Spot 10000 10000.00

F Future ?

Intt Rate 15.00% 15% * 6 mth 750.00 15.00% 13.98%

Carry cost 200 200.00 200*(12/6)/10000 4.00% 3.92%

Conv Yield 6% 6%* 6 mth 300.00 6.00% 5.83%

Period (n) 6 13.00% 12.07%

Future 10650.00 S*(1+(r+c-z)*n) 10650.00 Spot*Exp((r+c-z)*n)

Future Price with

No carry return F = S*eiT

INVESTMENT ASSECotton Discr

Spot price per unit of underlying asset S 1190 Rs

Interest Rate (cont Comp) 15.0% i 13.98% p a

Storage cost per annum

Value - settlement date 4/2/2013 -342.00

Expiry date of the contract 4/25/2012Contract Period T -342.000 -0.937

Future Price F ? 1022.75

Future Price

With Carry return F = S*e(i-r)T

INVESTMENT ASSEDiscrete Continuous

Spot price per unit of underlying asset S (Rs) 280

Interest Rate (cont comp) I (% pa) 10% 10.517% 10.00%

Value - settlement date 2/11/2011

Expiry date of the contract 5/11/2011

Contract Period T (Yrs) 0.244

Dividend - carry return 25 36.62% 31.20%

Dividend Yield (Cont comp) r 31.20%

Future Price F 262.18 265.89


17/50

Future Price

with Storage cost F = S*e(i+r-z)T

CONSUMPTION ASDiscrete Continuous


Interest Rate I (% pa) 12% 12.00% 11.33%



Contract Period T 0.167

Storage cost for the period Rs 8.33

Storage cost as % of Spot price r 10.00% 10.00% 9.53%

r' expressed at daily compounded rate 9.53%

Future Price F 517.69 518.33 517.69

Finding Convenience yield given the Y = - {ln(F/S)/t} + (i+r)

Spot, Future, Int, T and Storage cost Discrete Continuous


Interest Rate I (% pa) 8% 8% 7.70%



Contract Period T (Yrs) 0.16164

Storage cost for the period Rs 3.00 6.19% 6.00%

Storage cost as % of Spot price r 1.00%

Annualized storage cost as % of spot pr 6.19%

r' expressed at daily compounded rate 6.00%

Future Price F 290

Convenience yield z 34.67% 34.67% 290.00


18/50

continuous

(1+d1)(1+d2)/(1+d3)

1.1283

e(c1+c2-c3)

112.83%

10622.16

Cont

1043.94

J19


19/50

ET

228.154493

S*exp(i+r-z)t = F

exp(i+r-z)t = (F/S)

(i+r-z)t = Log(F/S)

(i+r-z) = (Log(F/S)/t)

z = i+r- [Log(F/S)/t]


20/50

Maize Nizamabad

Cash and Carry Arbitrage Buy Spot and Sell Forward

Spot Price 1044 Rs Given

Borrowing Cost 10% pa Given 0.214308

Date of transaction 1/25/2011 Given

Date of maturity 4/20/2011 Given 0.109091

No.of days 85 days Arrived

Implied Forward Price 1068.60 Rs Arrived F = S*er*t

Actual Forward Price 1197 Given

Cash and Carry Arbitrage Profit 128.40 Rs. Arrived

Implied Return 58.73% Annualized Arrived

Reverse Cash and Carry Arbitrage Sell Spot and Buy ForwardSpot Price 1334 Rs Given

Lending return 10% pa Given

Date of transaction 4/2/2013 Given

Date of maturity 3/18/2011 Given

No.of days 746 days Arrived

Implied Forward Price 1636.51 Rs Arrived

Actual Forward Price 1325 Given

Rev Cash & Carry Arbitrage Profit 311.51 Rs. Arrived

Implied Return 0.33% Annualized Arrived


21/50

Spot Futures

Date Price Price BASIS

21-Jan-10 734.80 774.00 -39.20 S1 Spot price at time t1

22-Jan-10 731.90 786.50 -54.60 S2 Spot price at time t2

23-Jan-10 737.35 788.00 -50.65 F1 Futures price at time t1

24-Jan-10 736.25 779.00 -42.75 F2 Futures price at time t2

25-Jan-10 737.55 780.50 -42.95 b1 Basis at time t1

28-Jan-10 739.45 772.00 -32.55 b2 Basis at time t2

29-Jan-10 740.40 774.00 -33.60

30-Jan-10 739.20 771.50 -32.30

31-Jan-10 738.00 770.00 -32.00 b1 = S1 - F1

1-Feb-10 734.35 770.00 -35.65 b2 = S2 - F2

2-Feb-10 733.80 764.50 -30.70

4-Feb-10 731.50 765.50 -34.00 Effective price that is obtained for t

5-Feb-10 732.70 770.50 -37.80

6-Feb-10 732.00 774.50 -42.50

7-Feb-10 732.55 770.00 -37.45 Had b2 been equal to zero, the eff

8-Feb-10 734.85 769.50 -34.65

9-Feb-10 739.90 765.50 -25.60What happens if there is maturity mism

11-Feb-10 739.90 767.00 -27.10

12-Feb-10 730.90 749.50 -18.60

13-Feb-10 730.55 744.50 -13.95

14-Feb-10 730.00 746.00 -16.00

15-Feb-10 726.50 740.00 -13.50

16-Feb-10 725.00 741.00 -16.00

18-Feb-10 724.75 740.00 -15.25

19-Feb-10 725.75 741.00 -15.25

20-Feb-10 725.75 739.00 -13.25


22/50

28-Jan-10 739.45

8-Feb-10 734.85

28-Jan-10 772.00

8-Feb-10 769.50

28-Jan-10 -32.55

8-Feb-10 -34.65

-32.55

-34.65 The hedging risk is the uncertainty associated with b2 and is known as ba

e asset with hedging is: S2 + F1 - F2 = F1 + b2

= 737.35

ctive price that is obtained for the asset would have been F 1 ie the hedged price

tch or Contract size mismatch or Asset mismatch?


23/50

sis risk


24/50

Where only data wrt s & f are provided and all stats incl , and are to be estimated a

Perio

d F S (F- f) (S-s) (F- f) (S-s)

(S-s)* (F-

f)

1 5.00 6.00 4.00 4.70 16.00 22.09 18.80 f2 4.00 3.00 3.00 1.70 9.00 2.89 5.10 s3 (4.00) (2.00) (5.00) (3.30) 25.00 10.89 16.50 Cov sf

4 2.00 3.00 1.00 1.70 1.00 2.89 1.70 5 3.00 2.00 2.00 0.70 4.00 0.49 1.40

6 (3.00) (1.00) (4.00) (2.30) 16.00 5.29 9.20 Min Hedge Ra

7 5.00 4.00 4.00 2.70 16.00 7.29 10.80

8 4.00 3.00 3.00 1.70 9.00 2.89 5.10 Portfolio

9 (4.00) (4.00) (5.00) (5.30) 25.00 28.09 26.50 NIFTY level

10 (2.00) (1.00) (3.00) (2.30) 9.00 5.29 6.90 NIFTY 1 contr

Cost of Min lot# Sum 10.00 13.00 130.00 88.10 102.00 No of Contr for

Average 1.00 1.30 14.44 9.79 11.33 No of cont for

Case 2 Where Beta is Given and a Portfolio is to be hedged

1,100

110.0% Say Nifty spot after 3rd mths was

Loss on portfolio

5,000 Futures for 1 mth S* e^(ti-ty)

NIFTY 1 contr size 50 Gain from futures

Cost of Min lot : NIFTY 250,000 No Sale Price Purch Price

Risk Free Rate 10.0% 1,500 5,101.01 5,527.57

Dividend Yield (Index) 4.0%

P/folio beta wrt NIFTY 1.5 Loss on Portfolio

No of mths Hedge needed for 4 Idx Gain Div Gain Net Idx Gain RF Rate

No of years effective 0.33 10.00% 1.00% 11.00% 2.50%

The Expd Future value = S* e^(ti-ty) Value of Portfolio

5,101.01 Total Gain /Loss

No of Contracts needed to be shorted Value of Position

to hedge portfolio * P/N 30 Net Gain (%)

950


Loss on portfolio




Risk Free Rate 10.0% 1,500 5,101.01 4,773.81


5,000,000

Portfolio (Rs) 5,000,000

NIFTY level now

Portfolio (Rs)

NIFTY level now

Case 1

Cov sf/f = * s fh = =

h = = Cov sf/f = * s /f


25/50


No of mths Hedge needed for 4 Idx Loss Idx Div Gain Net Idx Loss RF Rate

No of years effective 0.33 -5.00% 1.00% -4.00% 2.50%





1050


Loss on portfolio




Risk Free Rate 10.0% 1,500 5,101.01 5,276.32



No of mths Hedge needed for 4 Idx Loss Idx Div Gain Net Idx Loss RF Rate

No of years effective 0.33 5.00% 1.00% 6.00% 2.50%





Portfolio (Rs) 5,000,000

NIFTY level now

h = = Cov sf/f = * s /f


26/50

d Portfolio hedged

14.44 f 3.809.79 s 3.13

11.33

0.95

0.78

h * s /f 0.78

5,000,000

5,000

size 50

250,000/folio (norm) 20.00

Min Hedge h * PF / Min 15.69

5,500 Mths

10.0% 3

5,527.57 1,105.51

N

(639,843) (639,843)

Rf+b(Rm-R P/folio Loss

15.25% 762,500

5,762,500

122,657

5,122,657

9.8%

4,750 Mths

-5.0% 3

4,773.81 954.76

N

490,796 490,796


27/50


-7.25% (362,500)

4,637,500

128,296

5,128,296

10.3%

5,250 Mths

5.0% 3

5,276.32 1,055.26

N

(262,964) (262,964)


7.75% 387,500

5,387,500

124,536

5,124,536

10.0%


28/50

Spot price

February

contract Closing for

Futures

Closing price MTM profit

10:00 AM 1/1/2010 1600 29-02-2010 1650

Noposition at

the spot

Long on

futures 1/1/2010 1550 -100

1/2/2010 1535 -15

1/3/2010 1600 65

1/4/2010 1660 60

1/5/2010 1575 -85

1/6/2010 1550 -25

1/7/2010 1515 -35

1/8/2010 1635 120

1/9/2010 1660 25

1/10/2010 1685 25

29-02-2010 1700 15

Diff between closing of 28/

Hence the value of a futur

Spot price Closing for

Futures

Closing price MTM profit

1/1/2010 1600 29-02-2010 1650

No

position at

the spot

Long on

futures 1/1/2010 1550 -100

1/2/2010 1535 -15

1:00 PM 1/3/2010 1535 29-02-2010 1610 1/3/2010 1600 65

Short on

futures 1/4/2010 1660 60

1/5/2010 1575 -85

1/6/2010 1550 -25

1/7/2010 1515 -35

1/8/2010 1635 120

1/9/2010 1660 25

1/10/2010 1685 25

29-02-2010

Closing out the long position in futures


29/50

10%

Tot MTM

profit /

loss

Initial

Margin 165 82.5

Paid Margin

-100 65 Margin call

-115 50

-50 115

10 175

-75 90

-100 65

-135 30

-15 150

10 175

35 200

50 215

2 and 29/2 will be settled

is always reset to zero at the end of the day

Tot MTM

profit /

loss

Op prm

received

MTM

profit /

loss

Tot MTM

profit /

loss

-100

-115

-50 10 -40

10 -60 -40

-75 85 -40

-100 25 -40

-135 35 -40

-15 -120 -40

10 -25 -40

35 -25 -40


30/50

Month

Change in fuel

price per gallon

Change in

futures price per

gallon

x y

1 0.029 0.021 SD of x 0.026255

2 0.02 0.0353 -0.044 -0.046 SD of y 0.031343

4 0.008 0.001

5 0.026 0.044 Coeff of Correl of x and y 0.928372

6 -0.019 -0.029

7 -0.01 -0.026 Hedge ratio 0.777651

8 -0.007 -0.029

9 0.043 0.048 Qty of oil to be hedged 2000000 gallons

10 0.011 -0.006 Unit Qty traded on NYMEX 42000

11 -0.036 -0.036

12 -0.018 -0.011 No.of contracts to be hedged 37.03098 contracts

13 0.009 0.019 rounded 37 contracts

14 -0.032 -0.02715 0.023 0.029 Hedge effectiveness R 86.19%

1 Measures the ability of the hedging instrument to gene

offsetting changes in the fair value of the hedged instr

2 The r-square of the regression equation answers the q

of to what extent the hedge is effective

3 Rbelow the value of 70% is generally considered ine

S = hF + C +e

where h is the hedge ratio

R2

of the equation is the hedging effectiveness

To what extent S is explained by F

TAILING THE HEDGE To tail the hedge repla

Instead of Optimal number of contracts = hedge ratio *

Make it Optimal number of contracts = hedge ratio *

Spot price per gallon 1.94

Future price per gallon 1.99

Dollar value to be hedged 3880000 (Spot pric

Dollar value per contract 83580 (Future pr

No.of contracts to be hedged 36.10056 contractsrounded 36 contracts

gallons per


31/50

Example for tailing the hedge

Amount to be hedged

Period of hedge

Rate of interest

Amount to be hedged taking into account

tailing is

Forwards 100

Int rate 8% p.a

Period 0.5 years

Spot 90

1.10517091810.00%

-0.07257


32/50

Column1 Column2 SUMMARY OUTPUT

Mean 0.0002 Mean -0.0009 Regression Stat

Standard Error 0.00678 Standard Error 0.0081 Multiple R

Median 0.008 Median -0.006 R Square

Mode #N/A Mode -0.029 Adjusted R Square

Standard Deviation 0.02625 Standard Deviation 0.0313 Standard Error

Sample Variance 0.00069 Sample Variance 0.001 Observations

Kurtosis -1.03974 Kurtosis -1.4474Skewness -0.18317 Skewness 0.2231 ANOVA

rate Range 0.087 Range 0.094

ment Minimum -0.044 Minimum -0.046 Regression

uestion Maximum 0.043 Maximum 0.048 Residual

Sum 0.003 Sum -0.013 Total

fective Count 15 Count 15

Intercept

X Variable 1

e the size of the hedge with values

Size of Position / Size of 1 futures contract

Value of Position / Value of 1 futures contract

* No.of gallons to be hedged)

ice * No. of gallons per contract)

contract


33/50

Amt * e-i*T

10 Million Euros

3 Months

4% p.a

9.9005 Million Euros

S = 540 100

If ex

= y i= 8%Then ln(1+y) = x T= 1 Year

z= 1.30%

So if F = S*e(iT+z)

F= 500 116.1834

Then F/S = e(iT+Z)

Then iT+z = ln(1+(F/S)) -0.072570693 0.149999791

Since F and S are expressed in amounts and

F/S will be ratio, it has to be expressed in %

as the right hand side is in %

If F/S is 1.10, it is 10%

Therefore iT+z = ln(1+((F/S)-1))

-0.072570693


34/50

istics

0.928372

0.861875

0.85125

0.012089

15

df SS MS F ignificance F

1 0.011854 0.011854 81.11779 5.97E-07

13 0.0019 0.000146

14 0.013754

oefficientsandard Err t Stat P-value Lower 95%Upper 95% ower 95.0 pper 95.0%

-0.00109 0.003121 -0.34867 0.732917 -0.00783 0.005655 -0.00783 0.005655

1.108306 0.123056 9.006542 5.97E-07 0.842461 1.374152 0.842461 1.374152


35/50

Value of a Forward contract = (F(t,T) -

1 + r(T-t

Risk Free rate

Forward date

Original date of the deal

Forward price on the date of

Today

Forward price today

Value of the forward contract


36/50

F(0,T)

/365

13%15/Jul/10

15/Jan/10

original deal 1420

3/15/2010

1490

67.09 67.10792


37/50

Use of Betas in Index Futures

Beta of the technology stock possessed by the investor 1.2

No.of shares bought 10000

Price at which bought 1200 Rs.per sha

What is the magnitude of index futures hedge that is required?

Amount invested 2400000000

Size of the hedge (amt invested x beta) 2880000000

No.of contracts required to hedge:

For Nifty futures the index multiplier is 50 Rs

Suppose Nifty index value is 4800

Each Nifty futures contract has a notional value of 240000 Rs

Hence the number of Nifty futures contract that is required is 12000

51 contracts r

How do they offset?

Assume index falls by 1%

Each short Nifty futures contract produces a gain of 2400 Rs

51 short Nifty futures contract will produce a gain of 122400 Rs

Since stock price is Rs.1200, 1% fall in index will lead to

a fall of 1.5% in the stock and hence the stock price will fall by 1.20%

Hence the stock value will drop to 2371200000 Rs

Loss 28800000 Rs

The difference is on account of rounding off of the contracts

Assume you want to reduce the beta of the portfolio to 0.90 from 1.5 as you expect the ma

Desired level of Beta 0.6

Number of contracts to be hedged would be 6000.00

Number of contracts to be hedged rounded 6000.00

Assume index falls by 1%

Each short Nifty futures contract produces a gain of 2400 Rs

Short Nifty futures contract will produce a gain of 14400000 Rs

Since stock price is Rs.1200, 1% fall in index will lead to

a fall of 1.5% in the stock and hence the stock price will fall by 1.20%


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Hence the stock value will drop to 2371200000 Rs

Loss 28800000 Rs

Gain in the futures contract 14400000

Net loss 14400000

Had the beta of the portfolio been 0.9 the loss for 1% drop in indexwould have been 14400000


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e

unded

rket to fall

No. of contracts to hedge:

Amount Invested x (Actual Beta - Desired Beta)

Notional Val of 1 Nifty

6000


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2436000000


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FUNDAMENTAL ANALYSIS FOR A COMMODITY

Properties of the commodity

Uses of the commoditySpecial attributes of the commodity

Various varieties of the commodity

Industries which consume this commodity and its consumpti

Countries which produce this commodity and its production q

Countries which consume this commodity and its consumptio

Demand Supply position for the commodity

Exporting countries and the quantum they export

Importing countries and the quantum they import

Indian scenario of the commodityproduction quantity

consumption quantity

export / import quantity

production cycle

competitiveness vis--vis global markets

major production and trading centres

Substitutes for the commodity

Volume traded in the global and domestic exchanges

Price movements during the past one year

Yield analysis

Ware house storing cost for the commodity

Commodity contract specifications

Outlook for the commodity

Govt regulations affecting the commodity


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n pattern

uantity

n quantity


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Type of Contract

Name of Commodity

Ticker symbol

Trading System

BasisUnit of trading

Delivery unit

Quotation/base value

Tick size

Quality specification

Quantity variation

Delivery center

Additional delivery centres

Hours of trading

Delivery specification

Deliver Logic

No. of active contracts

Opening of contracts

Due date/Expiry date

Closing of contract

Daily price fluctuation limi


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Position limits

Mininmum Initial Margin

Special Margin

Contract Launch Month

2-May-08

2-Jun-08

1-Jul-08

1-Aug-08

1-Sep-08

1-Oct-083-Nov-08

1-Dec-08

1-Jan-09

2-Feb-09

2-Mar-09

2-Apr-09


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Futures Contract Specifications

ZINC INGOT

ZINC

NCDEX Trading SystemEx-Warehouse at Bhiwandi, exclusive of Import Duty, CVD/Excise, Cess, Sales Tax / VAT and

any other levy or tax. In addition, the Buyers will be liable to pay delivery charges to Seller as

notified by the Exchange before launch of respective contract5 MT (Five Metric Tonnes)

5 MT (Five Metric Tonnes)

Rs per KG

Re. 0.05/- per KG (5 Paise )

IS 209 -1992 / ASTM B6-03

+/- 250 KGs or 2% whichever is lower

Bhiwandi, Maharastra. Warehouse to be accredited within 50kms from the municipal limits

Delhi. Warehouse to be accredited within 50kms from the municipal limits

Location Premium/Discount as notified by the Exchange from time to time

As per directions of the Forward Markets Commission from time to time, currently-Mondays through Fridays : -

10:00 AM to 11:30 PM

10:00 AM to 11:55 PM (during US day light saving period)

Saturdays - 10:00AM to 02:00 PM

Expiry Date - at 11:30 PM / 11:55 PM *

All timings are as per Indian Standard Timings (IST)

* during US day light saving period.

The Exchange may change the above timing with due notice.The buyer and seller shall mark intentions of taking/giving through the delivery request

window at least 3 trading days prior to the expiry of the contracts and the intention will be

collected during 3 days which would be notified separately.Intention Matching

As per the launch calendar

Trading in any contract month will open on the 1st day of the month. If the 1st day happens

to be a non-trading day, contracts would open on the next trading day

Last trading day of the month

If last day happens to be a holiday, a Saturday or a Sunday then the due date shall be the

immediately preceding trading day of the ExchangeOn expiry of the contract, all outstanding positions not resulting in giving/taking of physical

delivery of commodity shall be closed out at the Final Settlement Price announced by the

Exchange

Daily price limit is (+/-) 5% from the previous day's closing price. If the trade hits the

prescribed daily price limit there will be a cooling off period for 15 minutes. Trade will be

allowed during this cooling off period within the price band. Thereafter the price band would

be raised by another 50% of the existing limit i.e. (+/-) 2.5% and trade will be resumed. If the

price hits the revised price band (7.5%) again during the day, trade will only be allowed within

the revised price band. No trade/order shall be permitted during the day beyond the revised

limit of (+/-) 7.5% from the previous day's closing price.


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Memberwise: 6,000 Metric Tonnes or not more than 20% of the market open position,

whichever is higher

Clientwise: 1,500 Metric Tonnes

The above limits will not apply to bona fide hedgers. For bona fide hedgers, the Exchange

will, on a case to case basis, decide the hedge limits. Please refer to Circular No.

NCDEX/TRADING-100/2005/219 dated October 20,20055%In case of additional volatility, a special margin at such percentage, as deemed fit, will be

imposed in respect of outstanding positions, which will remain in force as long as the

volatility exists, after which the special margin may be relaxed.

Contract Expiry Month

31-Jul-08

29-Aug-08

30-Sep-08

31-Oct-08

28-Nov-08

31-Dec-0830-Jan-09

27-Feb-09

31-Mar-09

30-Apr-09

29-May-09

30-Jun-09


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Groundnut CONTR

Asset Code

Product Code

Series Code

Trading System

Unit of Trading

Delivery Unit

Quotation/Base Value

Tick Size

Price Band*

Quality Specification

No. of delivery Contracts

in a year

Opening of Contracts

Due Date

Closing of Contract

*As per Circular No. NMCE/2007-08/0

**As per Circular No. NMCE/2007-08/

Limit on open position**

Trading Hours

Delivery Centers


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CT

GRNUTS

GRNUTSF

GRSMMMYYYY

NMCEs Derivatives Trading and Settlement System

Monday to Friday :- 10:00 AM to 05:00 PMSaturday :- 10:00 AM to 02:00 PM

GNUT

1 MT

20 Kgs

10 paise

Daily price fluctuation limit will be +/-2 %. Limit on daily price

fluctuation will be reckoned with reference to the previous close

price. If trade hits this price limit, trade would stop for 15 minutes,

where after price would be extended by another +/- 2%. No trade

would be permitted during the day beyond then revised price limit

of + - 4%

Quality Specifications as per Grade 'Special' in Schedule III ofGroundnut [Grading and Marking] Rules, 1965 [Agmark]

Maximum 12 monthly or minimum 2 monthly contracts running

concurrently.

Trading in any contract month will open on the 16th day of the

month, 12 months prior to the contract month.

15th day of the delivery months if 15th happens to be holiday then

previous working day.

Squaring up of positions will be permitted between 12th

and 15th

of

delivery month. No fresh positions building will be allowed. From

12th to the 15th of delivery month, seller can tender Warehouse

Receipt for settlement and Warehouse Receipt will be accepted for

settlement at closing price of the previous day.

Client 3,000 MT

Member 9,000 MT or 15% of total market open position in the

commodit whichever is hi her

97 dated 16 February, 2008

098 dated 16 February, 2008

Rajkot


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METALS SPICES Other Agri GRAINS ENERGY

Steel Jeera (Cumin Seeds) Rubber Maize Brent Crude Oil

Copper Cardamom Cotton Wheat Natural Gas

Aluminium Pepper Mentha Oil Sugar Furnace OilLead Turmeric Red Chilli Soya bean Thermal Coal

Tin Sesame seed Jute Chana Gasoline

Nickel Crude Palm oil Gur Air Turbine Fuel

Gold Castor seed Cashew Kernels Electricity

Silver Guar seed

Platinum Cococut


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BEVERAGES

Tea

Coffee

Commodity Maths Latest Version

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