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a) If you must buy some asset in future and you just want to hedge the risk what sort of derivative trading will you do? Explain in brief with payoff diagram.

a) If you must buy some asset in future and you just want to hedge the risk what sort of derivative trading will you do? Explain in brief with payoff diagram.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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a) If you must buy some asset in future and you just want to hedge the risk what sort of derivative trading will you do? Explain in brief with payoff diagram. b) If you have long position in one asset and you want to hedge the risk of price drop in that asset while still having the upside in case the asset price goes up, what sort of derivative trading will you do? Explain in brief with payoff diagram. c) Briefly explain the benefits of having a thriving capital markets even in an economy like India where banking system provides most of the funding to firms. d) What are the four types of traders? Name two types who facilitate the price discovery process and briefly state how do they facilitate?
Transcribed Image Text:a) If you must buy some asset in future and you just want to hedge the risk what sort of derivative trading will you do? Explain in brief with payoff diagram. b) If you have long position in one asset and you want to hedge the risk of price drop in that asset while still having the upside in case the asset price goes up, what sort of derivative trading will you do? Explain in brief with payoff diagram. c) Briefly explain the benefits of having a thriving capital markets even in an economy like India where banking system provides most of the funding to firms. d) What are the four types of traders? Name two types who facilitate the price discovery process and briefly state how do they facilitate?
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