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Thanks Shakti and David !!

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...

Thanks for the clarification Shakti. Much appreciated.

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...

Thanks..your explanation helps.

Quote from Hull Chap 17 (8th edition) - "If a call futures option is exercised, the holder acquires a long position in the underlying futures contract plus a cash amount equal to the most recent settlement futures price minus the strike price" In that case, for the above problem, in case the...

Hi..sorry I could not reply due to some technical issues on the portal, which now seems to have been resolved. The source of this particular question is Kaplan's Schweser notes 2015 for the FRM exam.

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...