How can the prices of crude oil derivatives be used to obtain market expectations about the behaviour of crude oil prices in the future? Support the arguments using references.
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How can the prices of crude oil derivatives be used to obtain market expectations about the behaviour of crude oil prices in the future? Support the arguments using references.
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- Explain in detail the pricing applications of commodity derivatives.What does vega measure? What can you tell from vega value? Can the vega of a derivatives portfolio be changed by taking a position in the underlying asset? Explain your answer.Describe how commodity futures markets can beused to reduce input price risk.
- Why is marking to market important? Examine the significance of market index futures in an economy and to investors?a)define and explain convenience yield, and describe how it is incorporated into the futures pricing model. b)discuss the debate on whether risk premium should be included in the pricing of futures and forward contracts. c) define backwardation, normal backwardation, contango, and normal contango. d) discuss the relationship between the prices of puts, calls, and forward/futures contracts on the same underlying asset using the put-call-forward/futures parity. e) discuss the boundary conditions on the prices of American and European call option contracts on futures.Analyze the use of FX Derivatives, Cost of Capital & Dynamic Risk Management Strategies?
- 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.What are the quantitative characteristics of the asset and how to measure. How does one asset in the same portfolio influence the other one in the same portfolio. What could be the influence of this relationship to the investor's portfolio? What is relationship between the return on an asset and returns in the whole market (market portfolio)?
