Critically discuss the use of forwards vs. futures instruments within firms and how these can be used in order to mitigate financial risks. Provide examples to support your answers.
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Critically discuss the use of forwards vs. futures instruments within firms and how these can be used in order to mitigate financial risks. Provide examples to support your answers.
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- Critically discuss the use of forwards vs. futures instruments within firms and how these can be used in order to mitigate financial risks. Provide examples to support your answers. Up to 1000 wordsa)define interest rate swaptions, and differentiate between payer swaptions and receiver swaptions. b)define forward swaps. c)define risk management. d)discuss reasons for practicing risk management. e)discuss how firms can benefit from risk management.Explain with examples how a firm can hedge its risks using options
- Why is marking to market important? Examine the significance of market index futures in an economy and to investors?Securities exchanges create efficient markets that do all of the following EXCEPT control the supply and demand for securities through price. allocate funds to the most productive uses. allow the price to be determined by supply and demand of securities. ensure a market in which the price reflects the true value of the security.Suggest what is the best financial instrument to offset market risk exposure and from market volatility? WHY?
- Using examples, explain how firms are affected by both systematic and firm-specific risk. What is the risk premium?Explain each of the investment instruments stated below that offered by financial institutions. These are the investment instruments you like to invest. Explain and justify why. Options FuturesInterest rate risk is of great concern to financial institutions and is often material tothe management and performance of an institution. Your Director has requested youto write brief notes on the following techniques of managing interest rate risk:I. Forward Rate Agreements II. Futures III. Swap IV. Option
- What are the implications of these calculations? In other words, based on each of the calculations, and being mindful of the need to balance portfolio risk with return, would you recommend that the company pursue the investment? Why or why not? Be sure to substantiate claims.Investment bankers perform which of the following role(s)? A. Provide advice to the firms as to market conditions, price, etc. B. Design securities with desirable properties C. Market new stock and bond issues for firms D. All of the options E. None of the optionsWhich of the following is an exchange risk management technique through which the firmcontracts with a third party to pass exchange risk onto that party, via instruments such as forwardcontracts, futures, and options? a. Risk Transfer b. Risk Avoidance c. Risk Adaptation d. Diversification