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

Q: Critically explain with examples the concept of futures and the differences between options and…

A: Futures in a type of derivative product in which there is a contract that is agreed in between two…

Q: Are futures prices always greater than the current spot price? Explain

A: The contango hypothesis battles that the purchasers of the items are the natural hedgers since they…

Q: a) Futures contracts and options on futures contracts can be used to modify risk. Required:Identify…

A: The derivatives are the contract which obtains its value from some underlying asset and earns return…

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: What is the difference between forward and futures contracts, focusing on the pros and cons of each

A: In certain ways future and forward deals are similar: both include the buying and selling of assets…

Q: What is the spread (i.e., difference) between futures price and spot price called? a) Convergence…

A: The futures price is an estimated price the investor expected in the future.  The spot price is a…

Q: What is the process that makes sure the market price of an underlying asset equals the price of a…

A: Futures contract is a derivative instrument in which the price of the underlying asset in fixed for…

Q: The market price paid for an option is best defined as: a. The strike price of the option b. The…

A: Options are of two types Call and put

Q: What is a normal market for futures? What does an inverted futures curve indicate?

A: The future refers to the legal agreement between the buyer and the seller to exchange underlying…

Q: Suppose a company knows the quantity of a commodity that it willproduce. Describe how it might hedge…

A: Introduction: Hedging is one form of investment in the concept of risk management system. It is an…

Q: se your own word to explain the spot versus Futures prices. a. what is Backwardation b. What is…

A: Spot price is the current market price of a security at which it can be traded in the market, that…

Q: What is ‘basis’ and what is ‘basis risk’ within the context of futures hedging. Briefly discuss what…

A: Future markets are derivative products that means they derive the prices from the underlying assets…

Q: What is a futures contract?

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

Q: How do forwards, futures, and swaps hedge risk?

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

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: Call option contains the right to ____ a futures contract

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

Q: Explain the difference between a put option and a short position in a futures contract.

A: The question is based on the basic concept of derivatives contract, an investor can create different…

Q: ontains the right to ____ a futures contr

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

Q: What is financial futures?

A: Financial futures are the contracts that are used for the selling and purchasing of different types…

Q: a) Futures contracts and options on futures contracts can be used to modify risk.Required:Identify…

A: Future contracts:  The future contracts are legal derivative contracts to buy or sell an underlying…

Q: Define commodity futures

A: Futures are a type of derivative contract that creates an obligation between parties to transact an…

Q: What’s the difference between spot markets and futures markets?

A: Introduction: Spot market can be defined as a over the counter market which involves trading of…

Q: What are advantages of futures options over spot options?

A: Futures: The contract to buy or sell assets at predefined prices but will be paid and delivered…

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

A: The concept of Future Price determination is simple:- Theoretical Future price is calculated based…

Q: the difference in the manner that futures and options modify portfolio riks

A: Future contracts are those whose value is determined by the underlying assets. These contracts are…