Derivatives are so called because they are derived from an underlying... Group of answer choices 1. Futures Market 2. Spot Market 3. Forward Market 4. Swap Market
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Q10. Derivatives are so called because they are derived from an underlying...
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- Briefly explain the following1. Spot market vs futures marketDefine each of the following terms:a. Derivative; natural hedgeb. Option; call option; put optionc. Long-term Equity Anticipation Security (LEAPS)d. Exercise value; strike (exercise) pricee. Binomial Option Pricing Model; Black–Scholes Option Pricing Model; riskless hedgef. Futures contract; forward contractg. Commodity futures; financial futuresh. Swap; structured notei. Inverse floaterj. Risk managementk. Speculationl. Hedging; long hedges; short hedges; perfect hedgeUse your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is Contango c. What is Basis
- 11.) Define Futures Contracts, and Options. How are these products commonly used as portfolio diversification mechanisms?Briefly describe the following types of derivative securities:1. Swaps2. Structured notes3. Inverse floatersDefine each of the following terms: a. Derivatives b. Enterprise risk management c. Financial futures; forward contract d. Hedging; natural hedge; long hedge; short hedge; perfect hedge; symmetric hedge; asymmetric hedge e. Swap; structured note f. Commodity futures
- The market that deals in futures and options is called O a Over-the-counter market Ob. Derivatives markets Oc Primary market Od New issue marketM3 The terms "contango" and "backwardation" are used to describe term structures of forward/futures prices (i.e., patterns of forward/futures prices of various maturities). Please explain the meanings of these two terms and the situations in which they occur (i.e., the reasons for them). Also, consider futures prices of gold. Do you expect them to be in contango or backwardation? Why?a) Define Forwards and Futures. b)Explain the differences between these instruments and how these derivatives are used to mitigate risk. nb: answer question a and b
- . Answer the following in a couple of sentences. d) Compare and contrast options with futures e) Compare swaps with forwards13. Distinguish the forward market from the futures market (included in your answer how counter-party risk is handled).The 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 opportunity