Derivatives

The derivatives program was reducing risk when the firm was investing in foreign currency futures for the first four months from the implementation date (February 1991 to May 1991). This is seen by the negative correlation of (0.94226594) between the derivative (futures) cash flow and the unhedged cash flow. A purpose of a perfect hedge is to obtain a net of zero or in other words, reduce your risk to nothing not including the cost of the hedge. If a correlation is negative, as it was for the first three

10. The current price of silver is $750. Storage costs are $8 per ounce per quarter payable in advance. The interest rate is 12% p.a. with continuous compounding. Calculate the futures price of silver for delivery in six months (to two decimal places).

Identify the potential risks which affect the company and manage these risks within its risk appetite;

Derivative contracts were either negotiated with specific counterparties (over-the-counter) or were standardized contracts executed and traded on an exchange. Negotiated over-the-counter derivatives were comprised of forwards, swaps, and specialized options contracts. Over the counter derivatives can be tailored to meet the customers’ needs with respect to time and quantity and they are not traded in an organized exchange. On the other hand, standardized exchange-traded derivatives consisted of futures and options contracts. Even though over-the-counter derivatives were usually not traded like securities in an exchange, they might be terminated or assigned to an alternative counterparty. Standardized derivatives trade on an exchange and have time and quantity that are fixed.

2. Describe the risk associated with making an investment in an international growth fund. Identify the risks that would be common to domestic an international funds, and those risk that would be unique to an international fund.

1. ht= -4.9t2+ 450, where t is the time elapsed in seconds and h is the height in metres.

Risk recognition and management are vital to the operation of this company (BHP Billiton 2015, p.20). According to the previous financial activities, there several significant risks influence BHP Billiton, which are commodity risk, foreign exchange risk, interest risk, transportation risk and sustainability risk.

Explain why investors may be attracted to high-risk investments such as exchange-traded derivatives, global funds, and other complex investment vehicles.

When coming up with an investment plan one has to assume the risks as this helps better tackle and consider every possible risk present. We have already been informed that the risk taking index for our client is 0.05.

CALCULATOR SECTION 1. For find at the point (3, 4) on the curve. A. B. C. D. E. 2. Suppose silver is being extracted from a mine at a rate given by , A(t) is measured in tons of silver and t in years from the opening of the mine.

But, even though the possibility of winning exists, the company is exposed to a greater risk if it does not hedge. Moreover, the policy of the company is to ensure against the risk, not to speculate on the foreign exchange market.

Established in January 1999, Pine Street Capital (PSC) was a market-neutral hedge fund that specialized in the technology field, facing market risk and trying to decide whether and which way to use in order to hedge equity market risk. They choose technology sector because the partners of PSC felt that they have enough ability to evaluate this sector and specially be good at picking out-performing stock. Short-selling of NASDAQ and options hedging strategy are the two major hedging choices for PSC. Either strategy has its own advantages in different economic periods and conditions. The fund has just through one of the most volatile periods in NASDAQ 's history, and it was trying to decide whether it should continue its risk management

3. The balance due hereunder shall be mailed within ten working days following the performance.

1. Flexibility saves resources - can prevent unnecessarily repeating planning, spending, and using resources such as time, money, workforce, to follow the traditional ways to do things done.

In their research study, Souder & Myles (2010) identify that risk is chiefly fundamental to investing. Böhringer & Löschel (2008) further add that there is no discussion of returns or performance that is deemed meaningful in the absence of at least some mention of the involved risk. However, the trouble for investors, who have just entered into the marketplace, involves the process of figuring where risk really lies, as well as what the difference between the various levels of risks. Relating to the manner, in which risk is fundamental to investments, a significant number of new