What is a Financial Derivative? What is the role of Derivatives in managing Financial Risk? Give an example.

Q: FINANCIAL RISK MANAGEMENT  Briefly explain what is Interest Rate Swap and who are the parties in an…

A: Swap is commonly used if any company can borrow money at any particular interest rate but prefers a…

Q: Explain how to Adjust Trading Security Investments to Fair Value.

A:

Q: What are the Derivative Securities? Elaborate in detail the different types and transactions of…

A: Derivative Contracts are used by parties to earn profit by executing a transaction at a favorable…

Q: risks of Credit Default Swap?

A: Credit Default Swap: Credit default swap is an instrument which provides assistance for the market…

Q: What are credit derivatives, and how do they operate?

A: Derivative instrument is the financila instrument which derive its value form the underlying asset.

Q: The derivatives market allows for

A: Derivatives refer to the contract among various parties whose value depends on a set of assets or a…

Q: Define speculation in derivatives

A: Individuals and Firms often trade in the derivatives market when they want to enter a trade on a…

Q: With example, differentiate between a physical settlement and a cash settlement in the derivatives…

A: A derivative market is a financial market in which financial derivatives such as futures contracts,…

Q: What is The Relationship between Interest Rate Risk, Default Risk, and Risk Premiums

A: Risk refers to the chances of any changes in the prices of securities underlying with an investor…

Q: Explain how alternative investments can act as a hedge against inflation.

A: Alternative Investments:  Stocks, bonds are financial instruments that fall under the category of a…

Q: Why the financial instruments do often called derivatives?

A:

Q: How does the Liquidity Premium Theory influence the market interest rate?

A: Liquidity is the ability of a financial asset or security to convert into cash at market fair value.…

Q: How do derivatives hedge risk?

A:

Q: What is derivatives market? Cite an example.

A: Before knowing the derivative market, let us know about the derivatives :  The instruments which…

Q: Explain NCREIF Index Derivatives Issued by Credit Suisse?

A: The National Council of Real Estate Investment Fiduciaries Property Index (NCREIF)gives an exclusive…

Q: Some financial instruments are called derivatives. Why?

A:

Q: Identify the major derivative securities used to hedge against risk.

A: Answer: Usually, the primary aim of derivative securities trading is to hedge risk against the…

Q: Discuss the use of derivatives and its implications to investors

A: Derivatives: Derivatives are those financial instruments which derive their value from an underlying…

Q: What are some examples of financial instruments that can be used for hedging interest rate risks,…

A: Interest rate risks are the risk of losing value of the investment as the market interest rate…

Q: Analyze the use of FX Derivatives, Cost of Capital & Dynamic Risk Management Strategies?

A: FX derivatives (Foreign exchange derivative) is defined as the financial derivative, where its…

Q: What is the difference between interest rate risk and default risk? How do combinations of terms in…

A: Interest rate risk is the risk of an investment due to changes in interest rate. When market rates…

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: 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: What is meant by coupon stripping in the Treasury market?

A: Coupon stripping is the separation of an instant bond's periodic interest bills from its foremost…

Q: What are derivative instruments? Give examples of derivatives and briefly describe them. What are…

A: Subordinates are protections that get their worth from a hidden resource or benchmark. Normal…

Q: What are some types of credit derivatives?

A: A credit derivative is a type of financial contract where credit assets are kept as an underlying…

Q: Many firms use derivative instruments to hedge exposure to changes in the fair value of an asset or…

A: How are you mitigating the risk among the various labels?

Q: What are credit default swaps and how do they work?

A: Financial derivatives are referred as the financial contracts where the value of these contracts is…

Q: How are derivatives valued on the balance sheet? How is the adjustment to fair value recorded…

A: Derivatives: This is the financial instrument used  for managing risk and safeguard the risk created…

Q: Is Bitcoin considered as a financial derivative?

A: Finance is the source for business and is required for the flow of money for any operations.

Q: Describe Derivatives Used to Hedge Risk.

A: Definition:   Derivatives: The contract whose value derives from the fluctuation of values of the…

Q: Describe Disclosure of Derivatives and Risk.

A: As per FAS 161- Please see below : Disclosures to be made in the footnotes for derivatives- 1. An…

Q: How should derivatives be used in risk management? What problems can occur?

A: Derivatives are financial instruments that have values derived from other assets like stocks, bonds,…

Q: What are the main distinctions between a traditional financialinstrument and a derivative financial…

A:

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.