Eg: Hedge a 1 million Equity liability with a S&P Future contract trading at $1600, Multiplier 250.
Should we write.
1st option: Answer: = 1,000,000/ (1600*250) = 2.5
Or Should be go write
2nd option:
Answer = Notional to hedge/(S&P Future price * Multiplier) = 1,000,000/ (1600*250) = 2.5
I understand we are given part marks for calculations. Which option is more suitable given time contraints we have? 1st or 2nd ?
I think it’s a best practice to write out the full formulas and then fill with your variables. Even if you get the question wrong the graders are probably more likely to award you partial credit.
What if u don’t write out formula and answer is correct, do they deduct marks? Will be cruel if they do?
writing the forumula is a huge waste of time, but if you write the correct formula down but get the calculation wrong would you still get partcial credit?
Schweser secret sauce says even if you write a formula that looks mostly correct but has a missed out term or term in the wrong place you will still get some points.
I’d always write it just to make sure