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    Forward price for an asset with a known percentage yield

    How can I derive the formula for the forward price of an asset which gives a known % yield? I don't get the logic behind it. The formula is F = S*exp(rf - q)t ; where rf is the risk free rate ,q is the known % yield, S is the asset's spot price , F is the forward price and t is the time into the...
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    Problem on binomial tree

    Hi, I came across the following problem in Hull. Q. Calculate the price of a three-month European call option on the spot value of silver. The three-month futures price is $12, the strike price is $13, the risk-free rate is 4% and the volatility of the price of silver is 25%. This is my...
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    Options on futures

    Question: AJex Harrison expects that his company will need 50,000 pounds of copper in three months and plans on using call options on copper futures to hedge the price risk associated with this purchase. Assume the following copper prices: Cash price: $3.25/pound 3-month futures price...
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