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You are planning to enter into a long forward hedge to offset a short forward position. If you choose a futures contract over a forward contract, which of the following circumstances do you want?

a. Do you want the term structure of interest rates (ex...the plot of interest rates against maturities) to be sloped up or down?? and why

b. DO you want the volatility of interest rates to be increasing or decreasing? and why

c. Do you want the volatility of the futures price change to be hugher or lower than the forward price? and why

d. Do you want the correlation of the spot to futures to be higher or lower than that of the spot to forwards? and why

 

Basic Finance, Finance

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