a) Futures contracts and options on futures contracts can be used to modify risk. Required:Identify the fundamental distinction between a futures contract and an option on a futures contract and explain the difference in the manner that futures and options modify portfolio risk.

Financial Futures Markets: Explain how sellers of financial futures contracts can offset their position. How is their gain or loss determined? Note: there are 2 parts to this question.

What apparatus exists to facilitate purchases and sales of futures contracts?

Which derivative does not reduce financial risk?a. optionsb. swapsc. futuresd.forwardse. answer not given

Discuss similarities and differences between futures contracts and forward contracts.

Define each of the following terms: c. Financial futures; forward contract

All of the statements below are true of futures contractsexcept that futures contracts: O a. result in predictable gross profits. O b. result in predictable cash flows. O c. eliminate downside risk and upside potential. O d. eliminate downside risk while allowing for upside potential.

What is the difference between the futures price and the value of the futures contract?

2

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