The purpose of the hedger in futures trading is () A. Transfer price risk B. Transfer ownership of goods C. Obtain risky profits D. Obtain physical goods
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The purpose of the hedger in futures trading is ()
A. Transfer price risk B. Transfer ownership of goods
C. Obtain risky profits D. Obtain physical goods
Step by step
Solved in 4 steps
- Discuss the following operating hedge strategies 1. Risk Shifting 2. Price Adjustment clauses 3. Exposure nettingWhich of the following is an exchange risk management technique through which the firmcontracts with a third party to pass exchange risk onto that party, via instruments such as forwardcontracts, futures, and options? a. Risk Transfer b. Risk Avoidance c. Risk Adaptation d. DiversificationUnder which of the following markets securities are newly issued? a. Primary Market b. Intermediary Market c. Money Market d. Bond Market
- Identify which refers to the relationship of interest and time of maturity of securities. Group of answer choices a. Term structure of interest rates b. Phillip's Curve c. Equilibrium interest and quantity d. Equilibrium price and quantity.(a) Outline in detail what is meant by a forward and futures contract. Evaluate the relationship between futures price and spot price, and give reasons to justify the necessity for exchange margin accounts. (b) Explain the concept of cost of carry model and its role in the pricing of financial futures contracts.The Capital Asset Pricing Model (CAPM) considers which type of risk in pricing the expected returns and risk of securities? A) Systemic risk. B) Unsystemic risk. C) Diversifiable risk. D) Non-market risk.
- Market risks are: B. Interest rate risk, foreign exchange risk, portfolio concentration, commodity price risk D. Equity price risk, interest rate risk, foreign exchange risk, commodity price risk C. Foreign exchange risk, commodity price risk, issue risk, credit risk A. Equity price risk, transaction risk, foreign exchange risk, commodity price riskDefine the terms, or give short explanations. -arbitrage -business risk -call -cash market/spot market -derivative/derivative market -derivative securityDescribe the Sale of Trading Security Investments.
- a) Define Forwards and Futures. b)Explain the differences between these instruments and how these derivatives are used to mitigate risk. nb: answer question a and bBasis risk refers to the risk: a. associated with unanticipated price movements on the underlying asset. b. of default on the futures contract. c. associated with anticipated price movements in the cash market. d. from a change in the spread between the price on the commodity or financial security in the physical market and the price of the related futures contract.Advantages of currency futures contracts relative to forward contracts include _ a. Higher liquidity b. Standardized contract specifications c. Freedom to sell the contract before maturity d. All of the above