What is a difference between Futures Contract and Forwards Contract?

Q: Explain the difference between a call option and a long position in a futures contract.

A: Both the options and futures are derivative contracts.

Q: How can derivative security be used to hedge portfolio risk?

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

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: What is the difference between forward and futures contracts, focusing on the pros and cons of each

A: In certain ways future and forward deals are similar: both include the buying and selling of assets…

Q: hy not?

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

Q: What is the difference in Forward Contracts and Future Contracts

A:

Q: what is fixed-price contract, and what are the benfit of chosing it

A: A contract where the price is fixed as negotiated by the parties is known as a Fixed Price Contract.…

Q: Highlight the key difference between option, futures and forward contracts.

A: Option, futures and forwards are three examples of financial derivatives. Option gives traders the…

Q: What is the relation between the expected rate of return and the required rate of return as they…

A: In the world of finance in general and investments in particular we often look at a security’s…

Q: How do derivatives hedge risk?

A:

Q: What is interest rate parity?

A: Interest rate parity: Interest rate parity is a theory concerning the association among spot…

Q: Identify the fundamental distinction between a futures contract and an option contract, and briefly…

A: Fundamental difference between a futures and option contract lies in following parameters:…

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: Explain what is meant by forward contracts and futures using examples. List the main advantages /…

A: An option offers the holder of it the right, and not the responsibility, to buy or to sell an asset…

Q: When is a forward contract preferred over an option contract ?

A: Forward contract and Option contract Option contract gives the right to the holder to buy or sell…

Q: Is the “forward price” the same thing as the “value of the forward contract” Explain.

A: Derivative is defined as the contract, which are between the two or more parties, who has the value…

Q: What is a futures contract?

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

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: Discuss the difference between forward and futures contracts, focusing on the pros and cons of each.

A: Hedge:   An investment strategy that is formed to reduce the risk of the adverse price movement of…

Q: Address the similarity and differences between option and forward/futures contracts.

A: An option contract is referred to as the promise, which used to meet the requirements regarding the…

Q: Explain why futures contracts may mitigate the credit risk involved in forward contracts.

A: Forward and future contracts are two types of risk management and hedging strategies.

Q: Call option contains the right to ____ a futures contract

A: A call option is an instrument which provides its holder an option to buy an underlying asset on a…

Q: Explain the difference between a put option and a short position in a futures contract.

A: The question is based on the basic concept of derivatives contract, an investor can create different…

Q: a) Futures contracts and options on futures contracts can be used to modify risk.Required:Identify…

A: Future contracts:  The future contracts are legal derivative contracts to buy or sell an underlying…

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: 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: Describe how the price of a futures contract is established in theory, with reference to arbitrage.

A: The concept of Future Price determination is simple:- Theoretical Future price is calculated based…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.