CBOE option market makers are also called liquidity providers. True or False?

Q: What Is Hedge against Marketplace Uncertainty?

A: Hedging is referred as the risk management strategy used to offset losses in investments by taking…

Q: Swaps are more useful for hedging, while options and futures are more suitable for…

A: Hedging is the process of buying or selling an asset to compensate the risk arising out of another…

Q: What is an equivalent process of a money market hedge? Why?

A: Money market hedge A technique of utilizing the money market that has high liquidity, as well as…

Q: Discuss the payoff structures for call and put options and the determinants of call and put option…

A: Since you have asked multiple question, we will solve the first question for you. If you want to any…

Q: Define speculation in derivatives

A: Individuals and Firms often trade in the derivatives market when they want to enter a trade on a…

Q: . Derivative securities are also called contingent claims because a. their owwners may hoose…

A: Derivative securities are securities whose payment completely depends on the value of other assets.…

Q: What determines if a potentially dilutive security is dilutive or anti-dilutive? a. the share price…

A: Earning per share means the profit earned after taxes per share outstanding. Diluted earning per…

Q: Describe Option-Pricing Theory.

A: Option pricing theory is a technique used to calculate the fair value of an option by using…

Q: options contracts

A: An option contract illustrates a two-party agreement that authorises a transaction on a certain…

Q: What is a financial option? What is the singlemost important characteristic of an option?

A: Answer: A type of financial security that derives its value from the value of a particular…

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: What is derivatives market? Cite an example.

A: Before knowing the derivative market, let us know about the derivatives :  The instruments which…

Q: Discuss three forms of market efficient market hyphothesis and discuss whether this fact violates…

A: Efficient market hypothesis states that the prices of the shares reflect whole information and there…

Q: What does market equilibrium mean? If equilibrium does not exist, how will it be established?

A: Introduction: Market equilibrium is nothing but that the marginal investors assume all shares are…

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: 1. (a) Describe the defining features of call and put options and explain intuitively using an…

A: Derivatives: Derivatives are a class of securities that derive their values based on another asset…

Q: Explain Price Return Swap?

A: A derivative contract which enables two parties to exchange financial instruments, cash flows,…

Q: Is it possible to view a firm's equity as an option? What could be the implications?

A: Let's recall the following two points:Basic accounting equation: Assets, A = Equity, E +…

Q: What is the role played by the clearinghouse if you are seller of a put option

A: Clearing house is intermediary between buyers and sellers which collect payment from both sides and…

Q: Why do you think the most actively traded options tend to be the ones that are near the money?

A: Near the money is an option contract in which strike price is almost equal or close to the current…

Q: Explain the following terms, In-the money option and At-the-money option.

A:

Q: Open market operations are typically repurchase agreements. What does this tell you about the likely…

A: Open market operations are those done by Central banks, which provide liquidity to a country’s…

Q: Explain with examples how a firm can hedge its risks using options

A: Hedging : Hedging can be understood as the  technique for risk management used to mitigate…

Q: Explain the Use of Derivatives to Hedge Portfolio Risk?

A: The contract whose value derives from the fluctuation of values of the underlying assets is called…

Q: Which of the following statements is correct? Select one: O A. Expectations theory combines…

A: The term structure of interest rates represents the relation between the interest rates and bonds…

Q: What is the payoff to call option buyer and seller?

A: Call option A call option is referred to as the financial contract which provides its holder an…

Q: a) Explain how contracts help to relocate, share and spread risk.  b) How can option contracts to be…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: What are the assumptions of Option-pricing models?

A: There are two option pricing models they are: Binomial model option pricing model Black Scholes…

Q: How can option contracts to be used for risk management? Explain the meaning of exercise price and…

A: Since, you asked multiple questions, we will answer the first question for you as per guidelines.…

Q: What are the Black-Scholes Options Pricing Model's underlying assumptions?

A: The Black-Scholes Options Pricing Model can be defined as the pricing model used to ascertain the…

Q: Derivatives are used in risk management because they _____. a. diversify risks b. hedge risks c.…

A: In the world of Finance, risk can be classified into various types, such as :- Credit risk - It is…

Q: What are some factors that affect a call option’s value?

A: Options are the strategies opted by investors in which investors have a right but not a commitment…

Q: Forwards and Futures: How are forwards and futures similar? How are they different? Briefly explain…

A: A forward contract is referred to the customized contract, which is between the two parties for…

Q: es tr ice of an individual security in such a market?

A: Market is efficient that means that information about the security is fully available in market.

Q: in options trading, margin must be posted by______

A: Margin is a amount of cash or securities that is necessary to deposit before executing trade in…

Q: How should derivatives be used in risk management? What problems can occur?

A: Derivatives are financial instruments that have values derived from other assets like stocks, bonds,…

Q: All else equal, will a call option with a high exercise price have a higher or lower hedge ratio…

A: A call option with a high exercise price has a low hedge ratio than one with a low exercise price…

Q: What is the importance of market risk premium?

A: Market risk premium Variance of the market return and the risk-free rate. It depicts the equity…

Q: What are those factors? Which is most AND least significant?

A: Following are the factors that affect option contract: Underlying Price Strike Price Time to…

Q: What is an efficient market and why is it important for derivatives markets?

A: Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only one…

Q: The Monte Carlo method for pricing options is often referred to as a method of last resort. Explain…

A: Monte Carlo Simulation: It is a method that is used to model the probability of different outcomes…