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MOCK derivative 6th form question: The risk-free interest rate is very low and...

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Finance

MOCK derivative 6th form question:

The risk-free interest rate is very low and analysts assume it is equal to 0% for valuation purposes. A trader has an existing short position in one forward contract with two- month maturity. When the trader was opening her position, the forward price was equal to 6 000 000. The underlying asset does not pay any dividends and does not generate any storage costs. One two-month European call option, written on the same underlying asset as the futures contract, costs 60 000. Today the trader decided to also buy two call options. Assume that the strike price, K, of the call options as well as the current price, A, of the asset underlying to both the futures and the options are both numerically equal to your URN student number so that:1 A = K = URN

Question 1: What is the current value of the existing forward contract, V?

V=?

Question 2: If, instead, the contract were not a forward contract but a futures contract, other- wise identical to the forward contract, establish and report how much money, V , the trader's margin account would have lost or earned since the trader opened the futures position. Please report a loss as a negative number and a gain as a positive number:

V = ?

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