Why is writing deep-in-the-money currency options tantamount to short-term financing?

Q: Which one of the following is not a part of money market? a. Call money market b. Commercial…

A:

Q: Is it financial expediency for firms to borrow?

A: The acquisition of debt funds by businesses is far more convenient than any form of funds and far…

Q: What is hard currency?

A: Hard currency: It alludes to cash published by a country seen as politically and financially steady.

Q: What is the difference (Who can invest?) between Money Market, Bond Market, Equity Market, Foreign…

A: The money market is the part of the financial market that invests in short-term debt with low risk…

Q: What are some moral hazard issues with structured finance?

A: Introduction : Moral hazard is an economic term used to describe a situation in which one party in a…

Q: how can credit matrics model mitigate future credit risk issues for Washington Mutual

A: Washington Mutual (WaMu) was a large financial institution that was severely impacted by the 2008…

Q: What is the difference (How will the investment earn?) between Money Market, Bond Market, Equity…

A: Financial markets refer broadly to any marketplace where the trading of securities occurs, including…

Q: Consider the monetary policy rule under financial frictions. If f >0 the prevailing market real the…

A: Consider the monetary policy rule under financial frictions.

Q: What is meant by Short-term financing?

A: Finance refers to the study of money , currency as well as the capital assets.There are basically…

Q: What is off-balance-sheet financing? Why might a companybe interested in using off-balance-sheet…

A:

Q: Why might an investor prefer a loan with a lower interest rate and a participation?

A: The amount linked with any amount that is granted as a loan, deposited or borrowed is known as…

Q: The risk of not having sufficient cash and borrowing capacity to meet deposit withdrawals, loan…

A: Interest rate risk refers to risk of change in value of investments due to change in interest rates…

Q: From the standpoint of a borrower, is long-term or short-term credit riskier? Explain

A: credit risk is define as the chances of a loss due to  borrower's failure to repay obligation in…

Q: What is signalling Theory in finance

A: Signalling theory is nothing but based on the assumption that information is not equally available…

Q: How does a high rate of inflation affect money in all its different roles?

A: Inflation: Inflation is a rate at which the price of the products and services rises. It frequently…

Q: Explain Payment Caps and Negative Amortization?

A: Payment Caps: A payment cap is a customer protection that bounds the amount that your monthly…

Q: Describe a short-term financing option and discuss the advantages and disadvantages.  Is there a…

A: Short term financing: Any loan that is obtained for a short period of time is Short Term financing.…

Q: WHAT IS A SMART CONTRACT? HOW CAN IT BE USED IN FINANCE?

A: Block technlogy is growing very much now days and it is used in finance quite much and this based on…

Q: What is a mini-perm or bullet loan? When and why is this type of loan used?

A: Answer: Project development may be characterized as the process of designing, planning,…

Q: Why Would People Buy Credit Default Swaps?

A: Credit-default swaps can be defined as insurance against default risk. For instance, financial…

Q: What is the money market (include in your answer the characteristics of the money market and the…

A: Financial Market is a place/mechanism which facilitates exchange of financial assets between holders…

Q: What does the financial breakeven point shows?

A: A breakeven point is a situation of no loss no profit. The breakeven point is generally calculated…

Q: Why is it important to study international finance management?

A: Financial management is a field of study related to the activities that help in managing out the…

Q: How does the cost of costly trade credit generally compare withthe cost of short-term bank loans?

A: Costly trade credit imply companies that make payments after the discount period as they forego the…

Q: Explain Loan Amortization Patterns?

A: A loan amortization pattern, as made by an amortization calculator, maybe a table enumerating each…

Q: Farmers Alliance Limited is considering investing in new equipment with the initial cost of…

A: in this we have to calculate the present value of future cash flow and deduct from that initial…

Q: Explain the challenges policymakers face when interest rates are very low.

A: An interest rate is referred to as an amount that is charged over as well as above the principal…

Q: whats the difference between finance and international finance?

A: The difference among finance and international finance: Finance: Finance is the organization of big…

Q: gs or debt) app

A: The explanation is given as,

Q: Answer the below questions. (a) For a single-name credit default swap, what is the difference…

A: A Credit Default Swap (CDS) is a financial contract between two parties where one party (the buyer…

Q: What is currency manipulation?

A: Introduction: Currency manipulation is considering as when countries purposely impact the exchange…

Q: RBC Royal Bank approved a four-year $20,000 Royal Buy-Back Car Loan to Zaman at 7.5% compounded…

A: The given values in the problem are:Principal amount (P) = $20,000Annual interest rate (r) =…

Q: Finance in classical economics studies all of the following issues EXCEPT Time value of money…

A: Finance in calssical studies all the following: time value of money, equilibrium price risk, asset/…

Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.