NO.PZ202312250100001003
问题如下：
Discuss if the two statements made by McGraw are correct. Justify each response.
选项：
解释：
Statement 1 is incorrect.
To establish the initial hedge one month ago, Schwinn must have sold the Canadian dollar (CAD) forward against the USD as it is long CAD. Selling CAD against USD requires buying USD, the base currency in the CAD/USD quote. Therefore, the offer side of the market must be used.
This means the all-in rate used one month ago would have been 1.3371 + (175/10,000) = 1.3546.
Statement 2 is correct.
To implement the hedge, Schwinn must sell CAD against the USD, which means buying USD, the base currency in CAD/USD quote. The base currency is in contango, meaning the base currency is trading at a forward premium. Buying the base currency USD at a forward premium and having to settle the forward contract by selling the USD spot at a lower price will result in a negative roll yield. Buying high and selling low will result in a negative roll yield.
Moreover, the USD has depreciated against the CAD, because the CAD/USD spot rate decreased between one month ago and now, which will also add to the negative roll yield.
To earn a positive roll-yield, the base currency should be sold at a forward premium or bought at a forward discount.
Statement 1: To establish the dynamic hedge, the all-in rate used by SIGF one month ago was 1.3497.
Statement 1 is incorrect, it should be 1.3546
Statement 2: All else being equal, the roll yield on this dynamic hedge at the forward contract’s maturity will be negative.
Statement 1 is correct,the roll yield=(S-F),since the spot currecy rate in CAD/USD depreciate, which is backwardation, so the roll yied is negative.