Options serve the same purpose as futures in that respect but are fundamentally different. How?

Q: Explain what a “riskless hedge” is and how the riskless hedge concept is used in theBlack–Scholes…

A: Riskless hedging: It is the process of buying the stock as well as sell call options simultaneously…

Q: Swaps are more useful for hedging, while options and futures are more suitable for…

A: Hedging is the process of buying or selling an asset to compensate the risk arising out of another…

Q: What is an equivalent process of a money market hedge? Why?

A: Money market hedge A technique of utilizing the money market that has high liquidity, as well as…

Q: What is Lump-sum cash-value option?

A: The option is the contract with two or more options for the financial instrument. The lump-sum cash…

Q: hy not?

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

Q: How is the call option price impacted by varying the risk free rate of interest? How is the call…

A: 1) Call option is the contract according to which the buyer of the option has the right but not the…

Q: Explain in detail with an example how the change of the variables (like Stock Price, Exercise Price,…

A: Black Scholes Merton is an option valuation model. In Black Scholes Merton formula, there are five…

Q: What’s the difference between a financial optionand a real option? What are some specific typesof…

A: Answer: Differences between financial options and real options: Financial options are those…

Q: options contracts

A: An option contract illustrates a two-party agreement that authorises a transaction on a certain…

Q: Is there an arbitrage opportunity? Explain. Calculate the risk premium interest rate that will…

A: Arbitrage opportunity arises when there exists a difference between the prices of similar item in…

Q: In a qualitative analysis, what factors affect the value of a real option?

A: An alternate choice that is accessible to the organization's managers taking investment…

Q: How are changes in the fair value of an option accounted for in a cash flow hedge? In a fair value…

A: Cash flow hedge: Cash flow hedge is the process of reducing or eliminating the risk of charges in…

Q: What is a financial option? What is the singlemost important characteristic of an option?

A: Answer: A type of financial security that derives its value from the value of a particular…

Q: What is in-the-money option?

A: Option is a financial instrument that gives the right to buy/sell an underlying in future date at a…

Q: Illustrate Derivatives?

A: Answer: A derivative is described as an investing technique defined to help the financial expert…

Q: What is margin requirement (for futures)?

A: Solution:- A Margin Requirement is the share of marginable securities that an investor should pay…

Q: discuss  the advanatages and disadvantages of options in the financial markets?

A: Advantages: The market is in fluctuation. In these circumstances the seller and buyer should use the…

Q: Why do you think the most actively traded options tend to be the ones that are near the money?

A: Near the money is an option contract in which strike price is almost equal or close to the current…

Q: Explain the following terms, In-the money option and At-the-money option.

A:

Q: what are the advantages and disadvantages of covered call and protective put which are options…

A: Due to uncertain factors, security prices fluctuate regularly which creates risk for the investors.…

Q: Explain the Use of Derivatives to Hedge Portfolio Risk?

A: The contract whose value derives from the fluctuation of values of the underlying assets is called…

Q: What are the assumptions of Option-pricing models?

A: There are two option pricing models they are: Binomial model option pricing model Black Scholes…

Q: What are some factors that affect a call option’s value?

A: Options are the strategies opted by investors in which investors have a right but not a commitment…

Q: What must be the price of a put option with the same strike price and expiration?

A:

Q: What is the purpose of the Black–Scholes Option Pricing Model?

A: Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or…

Q: What’s the difference between spot markets and futures markets?

A: Introduction: Spot market can be defined as a over the counter market which involves trading of…

Q: What are those factors? Which is most AND least significant?

A: Following are the factors that affect option contract: Underlying Price Strike Price Time to…

Q: CBOE option market makers are also called liquidity providers. True or False?

A: CBOE stands for the Chicago Board Options Exchange.

Q: What are advantages of futures options over spot options?

A: Futures: The contract to buy or sell assets at predefined prices but will be paid and delivered…