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DERIVATIVES & RISK MANAGEMENT ASSIGNMENT – II By: ATTIKA RAJ, ROLL NO: MS10A009, MBA- 2012 BATCH, DOMS, IITM 2/21/2012 I. Case Analysis – Risk management Policy of Lufthansa Submitted in Assignment 1 II. Case Analysis: Commodity Market Derivatives Case Solutions: 1. Discuss the risk exposure of Amarnath hedge fund. Ans: The Amaranth hedge fund was exposed to following risks: a. Market risk: The risk that occurs from the volatility of investment returns b. Liquidity risk: It measures

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Better EssaysEquity Derivative Strategies Equity Derivative Strategies Joanne M. Hill Vice President, Equity Derivatives Goldman, Sachs & Company Understanding the tax implications of equity derivatives and the application of these instruments for taxable U.S. clients is a challenge worth meeting. Equity derivatives can playa useful role in implementing tax-efficient strategies that maximize after-tax returns. The key is to understand the costs, benefits, and rules for applying each instrument or strategy

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Better EssaysReserve Bank of India Occasional Papers Vol. 24, No. 3, Winter 2003 Derivatives and Volatility on Indian Stock Markets Snehal Bandivadekar and Saurabh Ghosh * Derivative products like futures and options on Indian stock markets have become important instruments of price discovery, portfolio diversification and risk hedging in recent times. This paper studies the impact of introduction of index futures on spot market volatility on both S&P CNX Nifty and BSE Sensex using ARCH/GARCH technique.

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Better EssaysWhy do they call these contracts derivatives? Where is the optionality in these contracts? Weather derivatives structures commonly used are: i) cap - a call option; ii) Floor - a put option; iii) Collar - a put and a call option, usually with little or no premium; iv) Swap - a derivative with a profit and loss profile of a futures contract v) Digital option - an option that pays either a predetermined amount if acertain temperature or degree day level is reached, or nothing at all in other

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Decent EssaysCALCULATOR SECTION 1. For find at the point (3, 4) on the curve. A. B. C. D. E. 2. Suppose silver is being extracted from a mine at a rate given by , A(t) is measured in tons of silver and t in years from the opening of the mine. Which is an expression for the amount of silver extracted from the mine in the first 5 years of its opening? A. B. C. D. E. 3. Joe Student 's calculus test grades (G) are

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Satisfactory EssaysFinancial Derivatives Various Types and Pricing of Forward Contracts Contents 1. Introduction.............................................................................................................................3 2.1 Futures...................................................................................................................................4 2.2 Options....................................................................................................................

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Better Essaysit should come as no surprise that derivatives are so popular since many of the same people who work in Wall Street are betting at sports books. The Oracle of Omaha weighs in Warren Buffet is unquestionably one of the most admired and successful investors in the world. He is also the richest so his opinions carry some weight. Here is what he said about derivatives in the annual report of his securities firm, Berkshire Hathaway in 2002. "I view derivatives as time bombs, both for the parties

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Decent EssaysDerivatives are financial contracts whose price is either linked to the price of an underlying asset, commodity, rate, index or the occurrence or significance of a certain event. The phrase derivative originated from how the price of these contracts is derived from the price of some underlying commodity, security or index or the magnitude of an event. The set of financial instruments that include futures, forwards, options and swaps are referred to by the term Derivative. A derivative can be combined

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Decent EssaysDERIVATIVE is a transaction or contract whose value depends on or, as the name implies, derives from the value of underlying assets such as stock, bonds, mortgages, market indices, or foreign currencies. One party with exposure to unwanted risk can pass some or all of the risk to a second party. The first party can assume a different risk from a second party, pay the second party to assume the risk, or, as is often the case, create a combination. Derivatives are normally used to control exposure

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Decent EssaysFrequently Asked Questions on Derivatives Trading At NSE NATIONAL STOCK EXCHANGE OF INDIA LIMITED Derivatives Trading QUESTIONS & ANSWERS 1. What are derivatives? Derivatives, such as futures or options, are financial contracts which derive their value from a spot price, which is called the “underlying”. For example, wheat farmers may wish to enter into a contract to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction

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Decent EssaysWeather derivatives are based on standard derivative structures, such as puts, calls, and swaps. Fundamental attributes of these structures are: the tick size, which is the payout amount per unit in the index beyond the strike; the strike, which is the value of the underlying index when the contract starts to pay-out; and the limit, which is the contract’s maximum financial payout. v. Premium . The buyer of a weather option pays a premium to the seller that is typically between 10% and 20% of

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Better EssaysManagement 6 December 12, 2014 “An Analysis of Trading in Derivatives” 12 years ago, Warren Buffett warned that derivatives were “financial weapons of mass destruction” (Lenzner). 6 years after he made this statement, derivative traders helped induce the biggest financial crisis in America since the Great Depression. Derivatives are highly complex financial instruments that have fundamentally changed the way we perceive finance. Trading these derivatives has caused a financial revolution that has generated

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Better EssaysDerivative is a financial instrument whose value is derived from underlying asset. The underlying may be shares, commodities, indices such as NSE and BSE sensexs and even consumer price index. In case of common stocks (shares) the investors can purchase equity derived securities representing a claim i.e an option on a particular stock on certain index. What is important to understand is that derivatives are not products that can be sold accordingly , they are contracts

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Decent EssaysCHAPTER 24 DERIVATIVES AND RISK MANAGEMENT Please see the preface for information on the AACSB letter indicators (F, M, etc.) on the subject lines. True/False Easy: (24.1) Risk management FP Answer: a EASY 1. One objective of risk management can be to reduce the volatility of a firm’s cash flows. a. True b. False (24.4) Swaps FP Answer: b EASY 2. Interest rate swaps allow a firm to exchange fixed for floating-rate payments, but a swap cannot reduce

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Better EssaysFutures and Options in India BY: YOGIN VORA ON MARCH 25, 2010 NO COMMENT * Options Trading * Options Trade * Derivatives Trade * Trading in shares The Indian capital market has witness impressive growth and qualitative changes, especially over the last two decades. In the fifties, sixties and most of the seventies, it was in a dormant stage when the investors were generally not familiar with, or inclined towards, the corporate securities. During this time, only few companies

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Better Essays1. Both forward and futures contracts are traded on exchanges. : False 2. Futures contracts are standardized; forward contracts are not. : True 3. The S&P500 index futures contract is a physical delivery contract. The pork bellies futures contract is a cash-settled contract. : False 4. An American option can be exercised at any time during its life. : True 5. A put option will always be exercised at maturity if the strike price is greater than the underlying asset price. : True

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Good EssaysFutures contract In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today (the futures price or the strike price) but with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset

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Decent EssaysClassification of Derivatives: Derivatives are classified in terms of their payoffs and as exchange traded and over the counters. • Linear Derivatives: Linear Derivatives have linear payoff. E.g. Futures and forwards. • Non Linear Derivatives: Non Linear Derivatives have non linear payoffs. E.g. Options. • Exchange traded: These are standardized instruments and are backed by clearing house. So there is no default risk. E.g. Futures. • Over the counters: Over the counters are customized contracts

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Decent EssaysDERIVATIVES IN PAKISTAN In the year of 2001, the derivative products of equity of Pakistan were started in the Stock Exchange of Karachi. In the start of this launching, a single stock of futures was brought for introduction which was deliverable for just one month. It has almost nine years passed after that but this stock market is not considered as much as developed when it is compared to Indian market. The derivates related to finance, and which were traded in terms of exchange were initially

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Good EssaysProfessor: Henry Silverman Simran Preet Kaur Reema Kathuria FIN 485- (Investment Theory) This paper talks about risk management, analysis of derivatives in the financial market and how it affects the decisions of where to invest, whether to buy a particular derivative, mutual funds. However, it focuses on how to use options in the analysis of derivatives. The word options has many different meanings, but most of them include the availability or right to choose a certain alternative. Basically,

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