risk management

posted by .

You are the risk manager of an energy producing company. Your firm explores for and extracts crude oil. Your firm regularly produces approximately 50,000 barrels of oil monthly. You watch the energy markets closely and determine in early May 2011 that the current market price of $110 per barrel maybe a temporary peak.
Requirement
A: Construct both a futures and options hedge to lock in this $110 bbl price for the next 6 months. Be certain to specify contracts, quantities, dates and all relevant and pertinent information for this hedge, including the actions required to complete the hedge at the end of the time horizon.
B, Discuss the advantages and disadvantages of the futures and options hedging strategies in the above question. Be sure to discuss the important aspects of the two hedging strategies including, but not limited to, the capital requirements

  • risk management -

    Please note that we don't do students' assignments for them. Be sure to go back into your textbook or use a good search engine. http://hanlib.sou.edu/searchtools/

    Once YOU have attempted to complete YOUR assignment, please re-post and let us know what you think. Then someone here will be happy to comment on your thinking.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Probability

    Daily output of Marathon's Garyville, Lousiana, refinery is normally distributed with a mean of 232,000 barrels of crude oil per day with a standard deviation of 7,000 barrels. Find the probability of producing.. a. at least 232,000 …
  2. geography

    What is the significance of this and what are the consquences. I don't understand the world of economics. Maybe a little help to get started. Thank you. Canacol Energy, an oil firm listed in Toronto and Bogota has a goal to increase …
  3. economics

    What is the significance of this and what are the consquences. I don't understand the world of economics. Maybe a little help to get started. Thank you. Canacol Energy, an oil firm listed in Toronto and Bogota has a goal to increase …
  4. Economics

    What is the significance of this and what are the consquences. I don't understand the world of economics. Maybe a little help to get started. Thank you. Canacol Energy, an oil firm listed in Toronto and Bogota has a goal to increase …
  5. Statistics

    Daily output of Marathon’s Garyville, Lousiana, refinery is normally distributed with a mean of 232,000 barrels of crude oil per day with a standard deviation of 7,000 barrels. (a) What is the probability of producing at least 232,000 …
  6. math

    Tema Oil Refinery ( TOR ) is the only company mandated to refine crude oil in Ghana. The company has estimated that the fixed cost would be $ 80000. Variable costs depends on the amount of crude oil refined but include the cost of …
  7. Vba

    I'm trying to write a sub that asks how much oil I made, and then gives me number of barrels needed to hold oil, cost of producing oil, and profit from oil. This is what I have so far, I'm not sure what to do. Sub Oil() Dim barrels …
  8. Statistics

    Daily output of Marathon's Grayville, LA, Refinery is normally Distributed with a mean of 232,000 barrels of crude oil per day with a standard deviation of 7,000 barrels. a. what is the probability of producing at least 232,000 barrels?
  9. Math

    An oil company owns two refineries. The daily production limits and operating costs for each refinery are given in the table below. An order is received for 1540 barrels of high-grade oil, 1650 barrels of medium-grade oil, and 2860 …
  10. math

    An oil company operates two Southern refineries. The Alabama facility produces 500 barrels of high-grade oil and 200 barrels of medium-grade oil per day. The Texas facility produces 600 barrels of high-grade and 400 barrels of medium-grade …

More Similar Questions