Explain how the futures markets can be used to reduce interest rate and input price risk.

Q: What is the Futures and Options Market? What are the features? Provide information about the Futures…

A: Futures contract is a legal contract which is standardized in nature. The contract is used by market…

Q: Are futures prices always greater than the current spot price? Explain

A: The contango hypothesis battles that the purchasers of the items are the natural hedgers since they…

Q: Explain clearly what should happen to a security’s nominal interest rate as the security’s liquidity…

A: A yield curve is a graph that compares the yields (interest rates) of bonds with similar credit…

Q: Discuss the payoff structures for call and put options and the determinants of call and put option…

A: Since you have asked multiple question, we will solve the first question for you. If you want to any…

Q: Explain both the historical and the forward-looking approaches toestimating the market risk premium.

A: Historical market risk premium is the difference between the returns of the risk free securities and…

Q: Explain risk-free interest rate (the nominal short-term rate)

A: The Capital Asset Pricing Model describes the relationship between the projected return for assets…

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 how a company can use the futures market to hedge against rising rawmaterials prices.

A: Answer: If the price of key raw materials is rising, then a company can hedge against the risk by…

Q: Evaluate the criticism that futures markets siphon off capital from more productive uses.

A: Future contracts are derivative instruments which are used for hedging the exposure of increase or…

Q: Explain Interest Rates and Inflation Expectation?

A: An interest rate is the measure of cash a bank or creditor charges for right of entry to cash. The…

Q: Explain how a yield curve is constructed and what its shape reveals about interest rates.

A: The yield curve is referred to as the "lie," which is used to plot the yields of bonds that used to…

Q: An efficient capital market is best defined as a market in which security prices reflect which one…

A: Efficient Capital Market: It is the market where all  available information is reflected in asset…

Q: Explain Risk Premiums, Interest Rate Risk, and Default Risk?

A: Risk premium: A risk premium is nothing but the return above the risk-free rate of return that an…

Q: illustrate the use of derivatives to hedge portfolio risk with an example?

A: A derivative is depicted as an investment procedure outlined to assist the financial specialist to…

Q: Show graphically and explain the profits and losses of buying futures relative to buying call…

A: If an investor buys Future contract or Call Option Suppose the investor buys a call option at…

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: Explain what the yield curve is, what determines its shape, and how you can use the yield curve to…

A: The yield curve: The yield curve depicts the yields of bonds with similar credit ratings but with…

Q: Explain Price Return Swap?

A: A derivative contract which enables two parties to exchange financial instruments, cash flows,…

Q: Suggest what is the best financial instrument to offset market risk exposure and from market…

A: The question is based on the concept of hedging the market risk and volatility by use of a proper…

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: Explain risk-free nominal rate of interest rate

A: This is the raw rate of return which does not take inflation into consideration. This is the rate…

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: Which of the following are economic functions of futures markets? Flexibility in pricing products…

A: "Hi, Thanks for the question. Since you asked multiple question, we will answer first question for…

Q: Illustrate the market interest rate to find the net present worth?

A: Investors frequently find the present worth of the fund flows for the reason that savers receive the…

Q: Explain Interest Rates and Risk?

A: Interest Rate: Interest rate is the percentage of interest charge by a lender on his principal…

Q: Provide some idea of the effect of the sensitivity of security prices to changes in market interest…

A: Sensitivity of interest rate (IR) is a technique of measuring change in the price of securities in…

Q: What is the relationship between forward rates and the market’s expectation of future short rates?…

A: Forward rate implies the yield on the bond expected by investors in future. It is the calculated…

Q: What is futures market?

A: A market where both buyer and seller interact in order to buy and selling of futures contracts and…

Q: Immunization is intended to protect a portfolio against interest rate risk. What should be done? How…

A: Immunization is the strategy under which the checks on the interest rates are provided to the firms.…

Q: Interest rate swap is widely used by portfolio managers. Describe an example of how a manager can…

A: Forward contracts are the one wherein one circulation of future interest payments is swapped for the…

Q: explain short term trading strategy?

A: Short-term trading is a strategy in which trader aims to open and close their position of stock…

Q: discuss the advantages and disadvantages of options in the financial market

A: Options are financial instruments which derives its value from an underlying asset. The buyer of the…

Q: Compare and contrast the Spot market versus the Future market give examples

A: Spot market is the market where exchange and settlement of the transaction is immediate. examples of…

Q: the difference in the manner that futures and options modify portfolio riks

A: Future contracts are those whose value is determined by the underlying assets. These contracts are…