Anonymous at Wed, 24 Jul 2024 21:18:17 UTC No. 16295268

>>16295264
yeah /biz/ is filled with retards wh don't know anything about money. They just gamble their money on every fad coin scam

Anonymous at Wed, 24 Jul 2024 21:20:10 UTC No. 16295271

>>16295268
Ok, but can you even answer the question in a technical manner? If not, /sci/ is no better than /biz/

Anonymous at Wed, 24 Jul 2024 21:27:40 UTC No. 16295277

>>16295264
>ask myself "hmm will the market price probably be bigger than that in a year"
>if yes I buy
>if no I don't
>hedge my risk by diversifying my bonds, nigga

Anonymous at Wed, 24 Jul 2024 21:34:09 UTC No. 16295285

>>16295277
>You are Goldman Sachs
>A mining corporation is literally BEGGING you for a good deal
>turn them down because muh speculation
>Lose business to JPM Chase
>Fired with no severance
>You'll never work in finance again, bucko
Absolute retard dogshit

Anonymous at Wed, 24 Jul 2024 21:39:46 UTC No. 16295295

/biz/ is nothing more than pajeet scamcoin shilling.

Anonymous at Wed, 24 Jul 2024 21:40:49 UTC No. 16295296

>>16295285
>gold price goes to zero
>JPM Chase goes bankrupt
>thousands of slutty secretaries are now out of work and begging for my cock
What now, fag?

Anonymous at Wed, 24 Jul 2024 21:45:14 UTC No. 16295299

>>16295296
>JPM properly hedged their position
>They don't go bankrupt
Crazy how that works out. But hey, if you enjoy tutoring ngmi stem undergrads for slave wages, I suppose you can also dream about finance bros losing everything

Anonymous at Wed, 24 Jul 2024 21:50:50 UTC No. 16295306

>>16295264
>How do you set the price and then hedge your risk?
you need to get into mining rates, proven reserves and whether they're feasible to extract, futures estimates for industrial application demand and all else combined, current bullion stock, etc.
Not a simple answer, but there's reports on that stuff written every year.

Anonymous at Wed, 24 Jul 2024 21:54:10 UTC No. 16295307

>>16295306
While all of that may be true, I'm looking for a chapter 3 intro to derivatives tier answer. Broad strokes, anon. I make a contract with the mining company, ok. What other kinds of contracts should I be making to hedge, and with whom? Buying, selling, borrowing, etc.

Anonymous at Wed, 24 Jul 2024 22:01:56 UTC No. 16295311

>>16295264
Pic related is anyone not in financial engineering

Anonymous at Thu, 25 Jul 2024 00:30:40 UTC No. 16295430

>>16295264
>Answer in the other thread
>Rest of the thread still can't figure it out
Sci is shit

Anonymous at Thu, 25 Jul 2024 00:51:26 UTC No. 16295445

>>16295264
You set the price at whatever the current price of gold plus a bit less than the average annual appreciation of gold was over the last 5 years. (Because why would the mining company agree to this sale if they completely lose out on appreciation?)
Hedging the risks is unnecessary as gold has literally always remained highly valuable in all of human history. You simply hold the gold until you make a profit with its sale. Unless the Spanish Treasure Fleet has been lost at sea for centuries and is going to surprise inject galleons of gold into the market after Capitano El Shitanavigatore finally finds his way home gold will keep being highly valued.

Storage costs of gold are minimal. Goldman Sachs definitely already has secure facilities to store valuables and gold does not spoil and even large amounts of it do not take up a lot of space.
Plus gold can be used as a security for other ventures and thus allow you to make money by simply holding it.

Anonymous at Thu, 25 Jul 2024 00:58:29 UTC No. 16295452

>>16295445
>To hell with my position's liquidity, I'll just hold the gold if the price is bad! There's no need to hedge.
Seeing all these shit takes reassures me in my choice of degree program

Anonymous at Thu, 25 Jul 2024 02:15:57 UTC No. 16295535

>>16295264
Use the Black-Scholes-Merton Equation. Buy a put option on something that falls with gold in case the price of gold falls to hedge your bet.

Anonymous at Thu, 25 Jul 2024 05:51:40 UTC No. 16295678

>>16295452
Are you stupid? I told you that you can use the gold as security in other business ventures.

You already told us that you think the answer is derivates. But derivates are a blight and should rightfully be illegal.

Anonymous at Thu, 25 Jul 2024 06:01:32 UTC No. 16295684

>>16295264
To preface, i have no background in finance, all my knowledge is in chemistry and physics. But I will try to give my honest answer to the problem.
>Mining company is trying to sell you gold
Well, from what I do know, the current market price of gold is a little over $2000 per ounce, and it has been consistently going up since there's a finite amount of gold in the earth's crust and as a metal it never rusts, tarnishes, nor is reactive.
>how do you set the price?
Well, I'd try to go slightly above market price in order to get a profit and recuperate the losses we accrued in purchasing the gold
>how do you hedge your risk?
Every investment has risk at the end of the day. Gold has a low enough risk to be tolerated. It's one of those "low risk low reward" type of investments. The price of gold is unlikely to drop, as it's been used in antiquity. Hell, if the USD loses its purchasing power and we're forced to peg the value onto a metal, the first thing they're gonna peg it on is gold. It's gonna keep rising, but it's gonna be a slow rise.

Anonymous at Thu, 25 Jul 2024 06:15:16 UTC No. 16295694

>>16295264
The question is bullshit. Why would a company specialized in crypto want to sell gold?

Anonymous at Thu, 25 Jul 2024 06:27:02 UTC No. 16295701

>>16295678
>Use gold as security in lean hogs contracts
>Muh principles
Brainlet confirmed
>>16295684
No better or worse than any other idiot I suppose.
>>16295535
Finally, someone that knows what they're talking about. Can you explain the textbook's answer to me please?
>Borrow gold from Central Bank now
>Sell immediately in spot market
>Invest proceeds at risk free rate
>1 year later...
>Buy gold from mining company to repay central bank
The fixed forward price you set for the gold reflects the risk free rate you can earn and the lease rate you pay for borrowing the gold.

So far, I've figured out that since the contract I made with the mining company is a long forward, and I usually use long forwards to hedge when I will have to buy in the future, then I should be hedging a long forward by putting myself in a circumstance where I will have to buy gold in the future. Also, the market determines prices, so I should be using the market in some way.

Anonymous at Thu, 25 Jul 2024 06:42:01 UTC No. 16295717

>>16295264
what risk?
you either buy the gold or you don't lmao.
you finance fags are real dumb.

Anonymous at Thu, 25 Jul 2024 06:46:31 UTC No. 16295722

>>16295717
Here we see a prime example of how most STEM degrees are worthless at math and stats . No wonder COVID was such a fiasco

Anonymous at Thu, 25 Jul 2024 06:50:25 UTC No. 16295725

hehe

Anonymous at Thu, 25 Jul 2024 07:05:05 UTC No. 16295734

>>16295722
how rich do you think you'll get from john hull textbooks?

Anonymous at Thu, 25 Jul 2024 07:08:13 UTC No. 16295739

>>16295307
>What other kinds of contracts should I be making to hedge, and with whom?
Oh I thought you were asking a commodities specific question, not a finance question. Then you'd go with a futures contract, or options, no?

Anonymous at Thu, 25 Jul 2024 07:22:09 UTC No. 16295750

>>16295722
>insecure brainlet tries to reassure himself that he isn't dumber than the mathchads because they don't know how to do his homework

Anonymous at Thu, 25 Jul 2024 07:27:11 UTC No. 16295754

>>16295535
I ctrl-fd this, i still have the basic program in Java and Excel format.

Anonymous at Thu, 25 Jul 2024 10:40:35 UTC No. 16295877

>>16295739
Book gives a very specific answer
>>16295734
You tell me
>>16295750
>Implying I didn't already get my math degree

Anonymous at Thu, 25 Jul 2024 16:10:21 UTC No. 16296126

>>16295877
Given the book's answer involves fantasy ("risk-free rate") it is reasonable to conjecture the book believes in other fantasies, such as the efficient market. In such a fantasy textbook world, having found a zero risk solution, we don't have to compare our risk and return with other solutions because we can assume that someone else would already be arbitraging any difference so there would be no point.

Anonymous at Thu, 25 Jul 2024 16:49:10 UTC No. 16296177

>>16296126
Risk free rate is another word for Treasury bills. You're not going to win an argument against j Epstein

Anonymous at Thu, 25 Jul 2024 17:01:09 UTC No. 16296184

>>16296126
How did everyone else here just accept they were out of their depth while you continue to pretend like you know what you're talking about?