| Description |
One of Ace’s investor clients has entered a long six-month forward transaction with Ace on 100 shares of Xenaliya (XLYA), a non-dividend-paying technology stock. The stock’s spot price per share, S<sub>0</sub>, is €85, and the risk-free rate is a constant 1% for all maturities. Ace has hedged the client transaction with a long six-month XLYA futures contract at a price f<sub>0</sub>(T) of €85.42 and posted initial margin of €1,000. Three months after the forward and futures contracts are initiated, XYLA announces a strategic partnership with a major global technology firm, and its spot share price jumps €15 on the day’s trading to close at €123. Which of the following statements best characterizes the impact of the day’s trading on the MTM value of the forward versus the futures contract? |