How is that a currency futures contracts eliminate the possibilty of gaining a windfall profit from favorable movements ?

Q: "Futures contracts allow individual investors to protect themselves against volatility in interest…

A: Future contracts are derivative contracts which allows investors to purchase a security/commodity or…

Q: Advantages of currency futures contracts relative to forward contracts include _     a. Higher…

A: A futures contract is a legal contract to purchase or sell an underlying asset or security at a…

Q: .Under a cash and carry arbitrage, which of the following is correct? a) If the futures contract is…

A: Hi, since you have posted multiple questions, we will answer only the first one, as per the…

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: hy not?

A: Introduction : A forward contract can be seen as a private, customizable contract which is exchanged…

Q: What is the spread (i.e., difference) between futures price and spot price called? a) Convergence…

A: The futures price is an estimated price the investor expected in the future.  The spot price is a…

Q: Which of the following is a reason why the default risk of a futures contract is assumed to be less…

A: Derivatives securities are trading into the market for the purpose of gaining returns. These…

Q: Basis risk refers to the risk: a. associated with unanticipated price movements on the underlying…

A: Basis risk =  spot price of underlying instrument - future price of the underlying instrument.…

Q: Suppose a company knows the quantity of a commodity that it willproduce. Describe how it might hedge…

A: Introduction: Hedging is one form of investment in the concept of risk management system. It is an…

Q: Suppose that C is the price of a European call option to purchase a security whose present price is…

A: Let's understand the given information:Current stock price is SC is the price of a European call…

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: Describe how commodity futures markets can beused to reduce input price risk.

A: The futures are the types of financial derivatives in which two parties entered into a contract to…

Q: Normal backwardation maintains that, for most commodities, there are natural hedgers who desire to…

A: Futures options are a type of asset that allows traders to buy and sell futures contracts at…

Q: Explain why futures contracts may mitigate the credit risk involved in forward contracts.

A: Forward and future contracts are two types of risk management and hedging strategies.

Q: An increase in which of these factors increases the premium of a currency call option? Check all…

A: Call option is a derivative contract that gives the buyer the right but not the obligation to buy…

Q: What effect does relative inflation have on interestrates and exchange rates?

A: Inflation is general increase in the prices. Inflation directly affects the exchange rate and…

Q: Below is a chart with profit/loss on the vertical axis, and the $/£ exchange rate on the horizontal…

A: All of the options are incorrect.

Q: The ability to buy on margin is one advantage of futures. Another is the ease with which one can…

A: The question is based on the concept of future derivative contract, which is define as an exchange…

Q: Forwards and Futures: How are forwards and futures similar? How are they different? Briefly explain…

A: A forward contract is referred to the customized contract, which is between the two parties for…

Q: Under purchasing power parity, the future spot exchange rate is a function of the initial spot rate…

A: Purchasing power rule says that purchasing power shall be same across all countries so prices in the…

Q: Explain why maturity (T) has an indeterminate effect on the prices of European put and call options

A: European options define the timeframe when holders of an options contract may exercise their…

Q: The price at which a market maker is prepared to buy a currency is termed as O a. Spot rate Ob. Ask…

A: Market maker is an institution or a person who holds the currency or stock for future trading. A…

Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.