Explain how both the intrinsic value and the time value are measured for a forward contract to sell and for a put option.

Q: The price that the buyer of a call option pays for the underlying asset if she executes her option…

A: Call Option :— Call Option Which Gives the Holders the Right to Buy an Assets, But not an Obligation…

Q: Describe each of the following derivative instruments and suggest a specific risky situation that…

A: All of these derivatives instruments defined below.

Q: A call option holder has an obligation to sell the asset. True or false?

A: A call option is an instrument which provides its holder an option to buy an underlying asset on a…

Q: Describe the basis of Futures contracts and discuss the potential risks and rewards.

A: An agreement where there are two parties, say one is a buyer and another one is a seller decides to…

Q: Define time value of an option

A: Answer: In addition to its intrinsic value, the time value of an option is the part of the premium…

Q: What is a FUTURES CONTRACT and what are its key components

A: Derivatives are those securities, the value of which depends on another security. There are few…

Q: Describe about different types of investment derivatives.

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: What are the main differences between options and warrant contracts and forward and futures…

A: The difference among options and warrant contract:

Q: The price that the buyer of a call option pays for the underlying asset if she executes her option…

A: Option: A financial instrument that is based on the value of underlying securities, such as stocks,…

Q: Define the terms, or give short explanations.               -short sale/short selling…

A: A derivative is a financial contract whose value is derived from the underlying asset, which could…

Q: Compare and contrast the commitments taken on by the following:   A futures contract seller versus a…

A: A futures contract seller is a party who has agreed to sell a particular asset at a particular…

Q: option

A: Call options are those options which gives the right but not the obligation to the buyer to purchase…

Q: (i) Discuss the role of the three main categories of participants in derivative markets.…

A: Derivative markets are a part of financial market where the value of a contract is derived from its…

Q: Explain in detail the pricing applications of commodity derivatives.

A: Commodity Derivatives are the financial instruments which are traded on commodity as underlying…

Q: Design a forward contract on a stock with a particular delivery price and delivery date as a…

A: To generate an offsetting forward position, a synthetic forward contract utilities call and put…

Q: Describe about the Option-pricing models?

A: The option pricing model utilizes factors (stock value, exercise price, volatility, interest rate,…

Q: What is the effect of a company electing the fair value option with respect to a held-to-maturity…

A: Held-to-maturity security: The debt securities which are held by the investor with an intent to hold…

Q: what is the fair value option? explain how the use of fair value option reflect application of the…

A: Fair Value option is that the board has taken an additional step of giving companies the option to…

Q: Describe the accounting for the fair value option.

A: The fair value option allows the business to record its assets and liabilities at their fair value.…

Q: Identify the factors that can affect the value of an options contract. Assign these factors their…

A: These Greek names (Delta, Gamma, Theta, Vega, and Rho) are used to describe the different factors…

Q: Explain the main differences between futures contracts and forward contracts.

A: Solution- Future Contract-        A derivative may be a legal agreement to shop for or sell a…

Q: Share option compensation is what accounting subject?

A: Stock-based compensation: It is a way of paying employees, executives, and directors of a company…

Q: if there are two parties, they make a future option contract on gold, and they plan to take physical…

A: Physical delivery are majorly have the convergence in the price, which are basically between the…

Q: Which of the following describes a short call option? O The obligation to buy an asset for a certain…

A: Concept. In options contract, The buyer of the call option has the right and not obligation to buy…

Q: Which of the following best describes an option contract? a. It gives the holder the obligation to…

A: The option contract is a type of derivative contract which will be providing with the right to buy…

Q: Describe the difference between the forward price and the value of a forward contract?

A: First, let us define a forward contract. Forward contracts are agreements between two parties to buy…

Q: Discuss how equity can be viewed as an option. Who has theoption, and what decision can they make?

A: If an enterprise cannot satisfy its contractual obligation of debt, it is in default for every…

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: The major difference between future and option arises from the different obligations of buyers and…

A: The option and future are used to hedge investment as well as to make money and it represents the…

Q: When is a forward contract preferred over an option contract ?

A: Forward contract and Option contract Option contract gives the right to the holder to buy or sell…

Q: Is the “forward price” the same thing as the “value of the forward contract” Explain.

A: Derivative is defined as the contract, which are between the two or more parties, who has the value…

Q: What is a futures contract?

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: Which of the following describes a short put option? The obligation to sell an asset for a certain…

A: The put option give the right to the holder to sell the Asset by certain by certain date certain…

Q: Explain why futures contracts may mitigate the credit risk involved in forward contracts.

A: Forward and future contracts are two types of risk management and hedging strategies.

Q: What is the difference between a competitive bid and a negotiateddeal?

A: Negotiated deal: A negotiated bid contains only one general contractor who works in the best…

Q: How does a futures contract differ from a forward contract?

A: Derivatives: A derivative is defined as a financial instrument whose value is derived from the value…

Q: t is payoff to put option holder on expiry?

A: A put option is an instrument which provides its holder an option to sell an underlying asset on a…

Q: What are advantages and disadvantages of using derivatives? Discuss. Provide examples.

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

Q: Put–Call Parity - A put and a call have the same maturity and strike price. If they have the same…

A: Explanation : When share Put and Call having the same maturity & also Strike price is same then…