Q: What is the Futures and Options Market? What are the features? Provide information about the Futures…
A: Futures contract is a legal contract which is standardized in nature. The contract is used by market…
Q: Explain the difference between a call option and a long position in a futures contract.
A: Both the options and futures are derivative contracts.
Q: Critically explain with examples the concept of futures and the differences between options and…
A: Futures in a type of derivative product in which there is a contract that is agreed in between two…
Q: Swaps are more useful for hedging, while options and futures are more suitable for…
A: Hedging is the process of buying or selling an asset to compensate the risk arising out of another…
Q: In 1973, Fischer Black and Myron Scholes developed the Black-Scholes option pricing model(OPM).(1)…
A: It is a contract to purchase a financial asset from one party and sell it to another party on an…
Q: Distinguish between (2) spot and futures markets
A: A financial market is the market where financial assets are created and traded. Financial assets are…
Q: What are the main differences between options and warrant contracts and forward and futures…
A: The difference among options and warrant contract:
Q: Discuss the factors giving rise to an inverted futures market for a storable versus a non-storable…
A: The inverted futures market for storable goods exists when the short-term deal costs are more…
Q: the following in a couple of sentences. d) Compare and c
A: Compare and contrast options with futures : The most significant distinction among options as well…
Q: What is the difference between forward and futures contracts, focusing on the pros and cons of each
A: In certain ways future and forward deals are similar: both include the buying and selling of assets…
Q: What is the purpose of initial and maintenance margins? How does marking to market affect the amount…
A: Margins: Margins allow individuals who'd like to trade to borrow funds from brokers or brokerage…
Q: Discuss the advantages and disadvantages of using options to hedge as compared to using futures…
A: Introduction: The future is the financial instrument of the derivative market in which a buyer and…
Q: “Hedging is the basic function of futures market”. Discuss the statement in the light of uses of…
A: Hedging means constructing a fence around it. In financial markets hedging implies eliminating the…
Q: The most popular type of derivative securities is options. Discuss what is an option? Define calls…
A: Option is a type of derivative instrument which gives a right, not the obligation to the holder to…
Q: Briefly explain the following 1. Spot market vs futures market
A: There are two market spot market and future markets.
Q: Identify the fundamental distinction between a futures contract and an option contract, and briefly…
A: Fundamental difference between a futures and option contract lies in following parameters:…
Q: What is a normal market for futures? What does an inverted futures curve indicate?
A: The future refers to the legal agreement between the buyer and the seller to exchange underlying…
Q: Show graphically and explain the profits and losses of buying futures relative to buying call…
A: If an investor buys Future contract or Call Option Suppose the investor buys a call option at…
Q: What is the key difference between futures contracts and options?
A: Both futures contracts and options are derivative instruments. Their value depends on the value of…
Q: A position in T-bond futures should be used to hedge falling interest rates and a position in T-bond…
A: A long position in a financial instrument means the holder of the position owns a positive amount of…
Q: Carefully compare and discuss the concept of margins in forwards/futures markets and options…
A: Margin is the amount that is deposited as a security in the derivative contracts.
Q: se your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is…
A: Spot price is the current market price of a security at which it can be traded in the market, that…
Q: What is ‘basis’ and what is ‘basis risk’ within the context of futures hedging. Briefly discuss what…
A: Future markets are derivative products that means they derive the prices from the underlying assets…
Q: How do forwards, futures, and swaps hedge risk?
A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…
Q: Discuss the difference between forward and futures contracts, focusing on the pros and cons of each.
A: Hedge: An investment strategy that is formed to reduce the risk of the adverse price movement of…
Q: Which of the following statements is the most accurate for a long dated hedge using futures…
A: A futures contract is a contract for the purchase or sale of an underlying asset. Identifying the…
Q: For hedging purposes, option contracts and futures contracts can be used. (i) Briefly appraise one…
A: Pro for using option contracts- Trading in options are cost efficient because they have huge…
Q: Describe the five variables like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard…
A: After a long research done by financial economicts in searching a workable option-pricing model.…
Q: Spot vs. Futures prices Briefly explain the following: a. Basis b. Contango c. Backwardation
A: Spot price: The current price of a security at which it can be bought or sold at a specific location…
Q: What’s the difference between spot markets and futures markets?
A: Introduction: Spot market can be defined as a over the counter market which involves trading of…
Q: What are advantages of futures options over spot options?
A: Futures: The contract to buy or sell assets at predefined prices but will be paid and delivered…
Q: Briefly explain the pay-off structure of futures and options contract. Also make it more clear with…
A: Payoff is profit and loss forecast or likely profit with change in underlying price. Whenever…
Q: the difference in the manner that futures and options modify portfolio riks
A: Future contracts are those whose value is determined by the underlying assets. These contracts are…
. Answer the following in a couple of sentences
c) Compare and contrast forwards with futures.
d) Compare and contrast options with futures.
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- . Answer the following in a couple of sentences. d) Compare and contrast options with futures e) Compare swaps with forwardsCritically explain with examples the concept of futures and the differences between options and futuresUse your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is Contango c. What is Basis
- The below question is related to the "Financial Derivatives and Risk Management". Describe the five variables like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration that the Black-Scholes-Merton Formula uses to calculate the price of call and put options. Provide an adequate assumptions to support your explanations.Compare the pros and cons of futures, forwards, and options. What are the criteria for the selection of one instrument among these three derivatives?Explain in detail with an example how the change of the variables (like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration) of Black-Scholes-Merton Formula affect the price of the option.
- Briefly explain the following1. Spot market vs futures marketThe below question is of the course "Financial Derivatives and Risk Management". 1. Explain the call-put parity relation and how it is justified. 2. Describe the five variables like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration that the Black-Scholes-Merton Formula uses to calculate the price of call and put options. 3. Explain how the change in these variables like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration affect the price of the option. 4. Explain how these variables like Stock Price, Exercise Price, Risk-Free Rate, Volatility or Standard Deviation, and Time to Expiration are grouped to show the put-call parity relationship and suggest the condition in which there is an arbitrage opportunityin options trading, margin must be posted by______
- a)explain the concept of the delta normal method for calculating VAR when options are present in the portfolio. b)explain the basic concepts of the historical method and the Monte Carlo simulation method of calculating VARs. c)discuss the benefits and limitations of VAR. d)define credit risk (default risk). e)explain how option pricing theory can be used in valuing default risk.Describe the five variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) that Black-Scholes-Merton Formula uses to calculate the price of call and put options. Explain how the change in these variables (Assets price, Strick price or Exercise Price, Risk- Free- Rate, Time to Expiration, Volatility) affects the price of the option.a)discuss the put-call parity of options on futures, and use it to value put options on futures. b)discuss the pricing model for options on futures. c) demonstrate an understanding of butterfly spreads by defining butterfly spreads, discussing the circumstances under which investors would use a butterfly spread strategy. d) demonstrate an understanding of straddles by defining straddles, discussing the circumstances under which investors would use a straddle strategy. e) demonstrate an understanding of box spreads by defining box spreads, discussing the circumstances under which investors would use a box spread strategy.