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(solution) Suppose a trader buys gas at a fixed price (Y) at Henry Hub and


  • Suppose a trader  buys gas at a fixed price (Y) at Henry Hub and then sells the gas at Henry Hub  location for P(HH) + $0.02. The trader would rather receive a fixed price. The  trader should therefore take a position in a futures swap to receive fixed X  for P(HH). What is the highest Y so that the trader sill makes a profit, given  that X = a)$1.95
  • b)$1.93
    • c)$1.97
    • Speculative  cash-and-carry arbitrage  is least likely to do which of the following:
      • Increase price volatility
    • Reduce price volatility
      • Change the long-run equilibrium price  level
      • Change the physical price now

 

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Sep 13, 2020

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