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UX1 Index UX2 Index UX3 Index Date VIX 18.93 $ 19.17 $ 05/19/2004 $ 20.07 20.70 18.67 $ 05/20/2004 $ 19.34 $ 20.07 20.67 $ 05/21/2004 18.49 $ 19.17 $ 20.07 20.86 $ 05/22/2004 18.49$ 19.17 $ 20.07 20.86 18.49 $ 19.17 $ 05/23/2004 $ 20.07 20.86 05/24/2004 $ 18.08 $ 18.77 $ 19.04 20.53 17.50 $ 05/25/2004 $ 15.96 $ 18.00 19.80 15.97 $ 17.61 $ 05/26/2004 $ 18.09 19.86 17.90 05/27/2004 $ 15.28 $ 17.35 $ 19.73 05/28/2004 $ 15.50 $ 17.58 $ 18.06 19.68 18.06 05/29/2004 $ 15.50 $ 17.58 $ 19.68 18.06 05/30/2004 $ 15.50 $ 17.58 $ 19.68 05/31/2004 $ 15.50 $ 17.58 $ 18.06 19.68 06/01/2004 $ 16.30 $ 17.60 $ 18.16 19.74 17.65 $ 06/02/2004 $ 16.08 $ 18.10 19.59 06/03/2004 17.03 $ 17.60 $ 18.33 19.92 1Futures/Forwards (40 points) Using the data provided in the MidTermData.xls file please solve the following questions. Note: The data represents the actual futures prices and not a weighted average like from the EIA/DOE. So when a contract reaches expiration, the price for the front month price is the settlement price for the front month contract. The next day's price is the price coming from the prior month and is now the front month contract. For example, in january, the January contract is UX1 and February contract is UX2. When January expires, February becomes the UX1 contract a) What is the average roll price moving from the front month to the next month contract at expiry? (5points) b.) What is the average roll price when the market is in contango? (5points) c) What is the average roll price when the market is in backwardation? (5points) d.) Because you cannot hold the VIX index, calculate the average "arbitrage premium" built into the futures prices? (10points) e.) Based on the direction of the arbitrage premium...what dollar return would you get over the whole sample if you consistently went that direction each month assuming you entered into one futures position each month and the margin required at initiation of each contract was 15% of notional? What is the most you lose in any month?(10points) one f Explain if each VIX futures contract is a good forecast of future spot prices? (5points) UX1 Index UX2 Index UX3 Index Date VIX 18.93 $ 19.17 $ 05/19/2004 $ 20.07 20.70 18.67 $ 05/20/2004 $ 19.34 $ 20.07 20.67 $ 05/21/2004 18.49 $ 19.17 $ 20.07 20.86 $ 05/22/2004 18.49$ 19.17 $ 20.07 20.86 18.49 $ 19.17 $ 05/23/2004 $ 20.07 20.86 05/24/2004 $ 18.08 $ 18.77 $ 19.04 20.53 17.50 $ 05/25/2004 $ 15.96 $ 18.00 19.80 15.97 $ 17.61 $ 05/26/2004 $ 18.09 19.86 17.90 05/27/2004 $ 15.28 $ 17.35 $ 19.73 05/28/2004 $ 15.50 $ 17.58 $ 18.06 19.68 18.06 05/29/2004 $ 15.50 $ 17.58 $ 19.68 18.06 05/30/2004 $ 15.50 $ 17.58 $ 19.68 05/31/2004 $ 15.50 $ 17.58 $ 18.06 19.68 06/01/2004 $ 16.30 $ 17.60 $ 18.16 19.74 17.65 $ 06/02/2004 $ 16.08 $ 18.10 19.59 06/03/2004 17.03 $ 17.60 $ 18.33 19.92 1Futures/Forwards (40 points) Using the data provided in the MidTermData.xls file please solve the following questions. Note: The data represents the actual futures prices and not a weighted average like from the EIA/DOE. So when a contract reaches expiration, the price for the front month price is the settlement price for the front month contract. The next day's price is the price coming from the prior month and is now the front month contract. For example, in january, the January contract is UX1 and February contract is UX2. When January expires, February becomes the UX1 contract a) What is the average roll price moving from the front month to the next month contract at expiry? (5points) b.) What is the average roll price when the market is in contango? (5points) c) What is the average roll price when the market is in backwardation? (5points) d.) Because you cannot hold the VIX index, calculate the average "arbitrage premium" built into the futures prices? (10points) e.) Based on the direction of the arbitrage premium...what dollar return would you get over the whole sample if you consistently went that direction each month assuming you entered into one futures position each month and the margin required at initiation of each contract was 15% of notional? What is the most you lose in any month?(10points) one f Explain if each VIX futures contract is a good forecast of future spot prices? (5points)

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