1. a. What is the purpose of understanding:  .contingent claims?  .contingent strategies?

Explain all option compulsary......you will not explain all option then I will give you down upvote...

Consider the Inter-temporal Model with two time periods, t=0 and t=1. Home is a small open economy that can borrow and lend in the first period at the world real interest rate of 5%. In the first period, output is Yo = 100 and in the second period Y1 = 100. The country wants to smooth consumption as much as possible. The country ended period t=-1 with positive external assets, W-1 = 50. What is the value of the current account in period O and period 1? Also, what is the value of net factor income from abroad in period 1? What is the value of the trade balance in period 0 and period 1?

Pollution Busters Inc. is considering a purchase of 10 additional carbon sequesters for $100,000 aplece. The sequesters last for only 1 year before becoming saturated. Then the carbon is sold to the government. a. Suppose the government guarantees the price of carbon. At this price, the payoff after 1 year is $115,000 for sure. What is the opportunity cost of capital for this investment? Opportunity cost of capital b-1. Suppose instead that the sequ ered carbon has to be sold on the London Carbon Exchange. Carbon prices have been extremely volatile, but Pollution Busters' CFO learns that average rates of return from investments on that exchange have been about 20%. She thinks this is a reasonable forecast for the future. What is the opportunity cost of capital in this case? Opportunity cost of capital U.S. Treasuries with 1 year to maturity U.S. Treasuries with 2 year to maturity U.S. Treasuries with 3 year to maturity O Yes % b-2. Is the purchase of additional sequesters a worthwhile…