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- which one is correct please confirm? Q18: "An increase in the volatility of the underlying asset, all other things held constant, will ______ the option premium." increase decrease increase or decrease Not enough information is given.which one is correct please confirm? QUESTION 23 The ____ theory holds that the securities markets are demarcated by maturity. a. expectations b. liquidity premium c. boondoggle d. market segmentationThe 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
- Choose the best answer 1.) A place or system that primarily allows trading of financial assets with a maturity of more than one year 2.) Allows trade of commodities and contracts wherein they are to be delivered on a future date but at a set price 3.) A place or system that allows trading of highly liquid and short-term securities A.) Futures market B.) Bond market C.) Primary market D.) Money market E.) Capital market F.) Organized market G.) Over-the-counter market H.) Secondary market I.) Cash marketa) 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 bDescribe the effect of a change in each of the following factors on the value of a calloption:1. Stock price2. Exercise price3. Option life4. Risk-free rate
- a) define the following, and discuss the difference between them at origination, before expiration, and at expiration. ◦forward price and the value of a forward contract ◦futures price and the value of a futures contract b) discuss the assumptions under which futures and forward prices can be considered the same. c) describe how to incorporate discrete and continuous dividends into futures contracts on stocks and stock indices. d) explain and discuss the use of interest rate parity in pricing foreign currency forwards and futures. e) describe how spot prices are determined using the cost-of-carry model.What is the correct way to determine the value of a long forward position at expiration? The value is the price of the underlying ... ... multiplied by the forward price. ... divided by the forward price. ... plus the forward price. ... minus the forward price please need type answer not an imagea) Assume that call currency option enable to buy of dollar for Shs. 50.00 while it is quotedat Shs. 50.70 in the spot market, and premium paid for call currency option is Shs. 1.00.a)Calculate the intrinsic value of the call? b) Discuss the value of hedging to a firm.
- A swap: Group of answer choices B. Gives the holder the right to see the underlying bond. A. Allows the buyer to purchase the underlying instrument. C. Is an OTC agreement to exchange the cash flows of two different securities. D. Not effective at managing interest rate risks.Assignment One The curvature of the bond price yield curve has been explained to be caused by three basictheories or hypotheses, namelya) Liquidity preference theoryb) Market segmentation hypothesisc) Expectation hypothesisExplain each of the above and how they influence the price-yield curve.Match the vocabulary below with the following statements. • organized market,• maintenance margin,• standardized contract,• margin call• standardized expiration,• variation margin,• clearing corporation,• open interest,• daily recontracting• interest rate risk• marking to market• cross-hedge• convergence• delta-hedge• settlement price• delta-cross-hedge• default risk of a future• ruin risk• initial margin(a) Daily payment of the change in a forward or futures price.(b) The collateral deposited as a guarantee when a futures position is opened.(c) Daily payment of the discounted change in a forward price.(d) The minimum level of collateral on deposit as a guarantee for a futures position.(e) A hedge on a currency for which no futures contracts exist and for an expiration otherthan what the buyer or seller of the contract desires.(f) An additional deposit of collateral for a margin account that has fallen below itsmaintenance level.(g) A contract for a standardized number of units of a…
