Swaps are more useful for hedging, while options and futures are more suitable for speculation”. Do you agree ?

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: Explain carefully how swaps allow firms and banks to separate different types of fixed income risk.…

A: An interest rate swap is a contract between two parties in which one stream of interest payments is…

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: Do derivatives markets give participants the beneficial opportunity to adjust risk exposures to…

A: The derivatives are the contract between the two parties, where the value is determined by the…

Q: (1) If derivatives can be so risky, why do so manybusinesses continue to use this market to…

A: Note : As per the guidelines, only first question will be answered. Kindly post the remaining parts…

Q: hy not?

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

Q: Discuss the advantages and disadvantages of using options to hedge as compared to using futures…

A: Introduction: The future is the financial instrument of the derivative market in which a buyer and…

Q: Explain why speculating in derivatives, futures contracts and options is not appropriate for the…

A: Speculation regulates the international financial system. Future action in stock market is dependent…

Q: What is a futures contract, and how are futuresused to manage risk? What are you protectingagainst…

A: Answer: Future contracts are an agreement to buy or sell anything on a specified future date. Two…

Q: The major difference between futures and options arises from the different obligations of buyers…

A: In futures contract, both the buyer and seller of the contract are obligated to buy and sell the…

Q: A position in T-bond futures should be used to hedge falling interest rates and a position in T-bond…

A: A long position in a financial instrument means the holder of the position owns a positive amount of…

Q: Carefully compare and discuss the concept of margins in forwards/futures markets and options…

A: Margin is the amount that is deposited as a security in the derivative contracts.

Q: which one is correct please confirm? Q20: The main advantage of using options on futures contracts…

A: Options and futures contracts are two different alternatives to minimise the risk by setting a…

Q: dger B. Assume all the optimal hedge assumptions are satisfied. Which of the following is true…

A: Step 1 Hedging is a technique for the management of risk which involves holding an opposite position…

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

A: Options and futures are similar trading products that provide investors with the chance to make…

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 forwards, futures, and swaps.  What are the features of each type of derivative and how are…

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: How do forwards, futures, and swaps hedge risk?

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

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: Which derivative does not reduce financial risk? a. options b. swaps c. futures d.forwards e.…

A: Financial derivative is referred as the financial instrument, which can link to the particular…

Q: 2.) In your own words, explain why the index futures is an important class of derivative securities.…

A: Indexed futures are basically the futures listed on the stock exchanges. Futures are derivatives…

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…

Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.