Explain Derivative security?

Q: what is an available-for-sale security?

A: Securities are financial instruments that can be traded easily. The entities use these securities to…

Q: Define asset-backed security

A: Answer: Asset backed security is nothing but a security is made up of other financial securities.…

Q: What is meant by a dilutive security?

A: Dilutive security is a type of investment security that helps the company increase its equity…

Q: Define default risk

A: Default risk: It is the threat or risk of a bank taking on the plausibility that a borrower will not…

Q: Explain risk arbitrage

A: It is a venture system to benefit from the narrowing of a hole of the exchanging cost of an…

Q: What is a derivative security?

A: Financial Instruments: It represents assets that are traded in the financial markets and are…

Q: What is preemptive rights offering?

A: Preemptive rights:  A contractual clause that provides the shareholders with a right to purchase the…

Q: Define symmetric hedge

A: Introduction: It is a technique that reduces risk, like currency fluctuations, stock price…

Q: What is over-the-counter (OTC) trade?

A: It is an electronic communications network which permits the investors to sell and buy the stocks.…

Q: What is the Security Market Line (SML) ?

A: Answer: A security market line (SML) is a line that representing the relationship between systematic…

Q: Explain Contraction risk?

A: Contraction risk may be a hazard that the backer of fixed-revenue securities faces. This hazard…

Q: Explain Prepayment Patterns and Security Prices?

A: The lending process is subjected o interest rates changes which may trigger prepayment of the…

Q: How do  Negotiable Instruments work?

A: A negotiable instrument is a signed document that offers a specific person or the assignee a…

Q: Define within-firm risk

A: Within-firm risk: Corporate (within-firm) risk is a hazard identified with an individual business.…

Q: What does maturity matching mean, and what is the logic behindthis policy?

A: Maturity matching It is a financing strategy for working capital. Under this strategy, financing of…

Q: What is the value of the security market line?

A: Security Market Line: The graphical representation of Capital Asset Pricing Model is known as…

Q: What is Eurobond?

A: Eurobond It is a debt instrument that is designated in money other than the nation's home cash or…

Q: Define diversifiable risk

A: Diversifiable risk It is special to a given business or industry. Regularly known in the feeling of…

Q: What is perfect hedge?

A: Hedge: A hedge is referred as an investment to decrease the risk of opposing price movements in an…

Q: How are the characteristics of an organized security exchange differ from an over the counter…

A: Financial markets contain any marketplace where securities such as the stock market, bond market,…

Q: Discuss various types of security and non- security financing.

A: Step 1   Security is a financial instrument, usually any tradable financial asset. The definition of…

Q: What is an Anti-dilutive Security

A: Anti-dilutive securities are those securities that a company has issued and which can get converted…

Q: What is securitization?

A: Introduction: Finance reflects a broad variety of spaces where decisions can be taken relative to…

Q: Define fair value hedges.

A:

Q: o and you are planning to add a single security to that security you are adding is relevant, The…

A: Portfolio refers to the combination of financial investments like bonds, stocks, cash, etc., and…

Q: What is liquidity (security)?

A: Introduction: Liquidity is associated to rapid access to cash. Persons hold assets or security, and…

Q: Define asymmetric hedge

A: A strategy that helps to reduce the loss which occurs from the movement of the asset's price is term…

Q: What is exchange risk, as distinct from exposure?

A: Foreign exchange risk or foreign exchange exposure refers to the financial risk associated with a…

Q: What are the differences between bottom-up and top-down approaches to security valuation? What are…

A: A top-down method to security evaluation starts with an examination of the worldwide and national…

Q: Explain about the Hedging against fair value risk.

A: Financial instrument:   It is a monetary contract between two parties which acts as an evidence of…

Q: What is collusion?

A: Auditing: Auditing refers to the process of verifying the correctness and fair presentation of…

Q: Which one of the following is the formula that explains the relationship between the expected return…

A: Beta captures the systematic risk of the security. There exists an important formula in financial…

Q: State difference between sureties and security?

A: In development contracts, if a worker for hire neglects to play out the works, the business would…

Q: Define Security Market Line (SML

A: When the cost of equity obtained from CAPM model is graphically presented, it is known as Security…

Q: Define convertible security

A: A convertible security is a security that can be changed into another form of investment. The most…

Q: (a) Which of X, Y, and Z is a risk-free security when considered on a standalone basis?

A: Portfolio is the collection of securities or investments. The return on portfolio is the weighted…

Q: can goodwill be amoritized?

A: Goodwill: Goodwill is an intangible asset to the company. However, goodwill is recorded in the books…

Q: Define each of the following terms.e. Convertible security

A: Introduction: Usually, a security is nothing but a financial instrument and it is a tradable…

Q: Explain the fair value option.

A: Fair Value Option: It is a process of measuring the financial assets and liabilities using the fair…

Q: How is VaR used to limit risk?

A: Value at Risk (VaR) a statistical tool which measures and quantifies financial risk a firm or…

Q: How does compounded interest work?

A: compound interest : it is the interest on loan calculated based on principal and interest.

Q: what is the risk-free rate (rf)?

A: Risk free rate is also called as treasury bill rate. This treasury bill rates are free from default…

Q: What is a “convertible security”?

A: Securities: Securities refers to a negotiable financial instrument that holds some type of monetary…

Q: What is natural hedge?

A: Hedging  is a strategy in which financial instruments and strategies are used to reduce the risk.…

Q: What is negotiated deals (security offerings)?

A: Negotiated deals are usually referred to in the context of fixed-income securities. The parties…

Q: Given the information in the following table, what is the expected return of the security?

A: Expected Return: It refers to the amount of gain/loss anticipated by the investor on an investment.…