1. An investor has just obtained the following quotes for a European option on GE stock worth $31. Features of both options are following. European synthetic call $3 European synthetic put $2.25 Strike price $30 Expiration 3 months Risk free rate 10% annual Find an arbitrage opportunity from put-call parity.

Q: Define trading venue

A: Definition:   The facility where multiple buyers and seller trade financial instruments. It allows…

Q: Explain the differences between upstream and downstream intra-entity transfers, as well as how each…

A: Intra-entity transfer refers to transfer of goods or products among the entities. More often, such…

Q: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can…

A: Quoted price ( Unadjusted ) means price without adjustments.

Q: What document is the difference between a primary and a secondary market?

A: Primary Market: The primary market is where new securities are formed, while the secondary market is…

Q: etween: i. A Primary Market and Secondar

A: Primary Market The process through which a market becomes a source of securities is referred to as a…

Q: Describe about different types of investment derivatives.

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

Q: All parties involved in a swap will benefit from the creation of a swap arrangement. a. True O b.…

A: A swap arrangement refers to an agreement between two parties to exchange specified cash flows at…

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: Define symmetric hedge

A: Introduction: It is a technique that reduces risk, like currency fluctuations, stock price…

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: ferent Between spot and forward ma

A: In commodity or any assets markets there are many types of markets are there depending on the basis…

Q: With example, differentiate between a physical settlement and a cash settlement in the derivatives…

A: A derivative market is a financial market in which financial derivatives such as futures contracts,…

Q: age of over-the-counter products such as swaps or forwards contracts, relative to exchange-traded…

A: Exchanged traded products are traded on stock exchanges where as over the counter products are…

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: hat is an arbitrage opportunity? plain very briefly.

A: Arbitrage is risk free and a certain profit is available in the market due to the market not in…

Q: Define alternative trading system (ATS)

A: An alternative trading system (ATS) is not an exchange-regulated, yet a position that suits its…

Q: A despised football coach is scheduled to make $978,200.00 per year for the next 8 years. The first…

A: The net present value is used to find the profitability of a project by discounting future cash…

Q: Fair Value Measurement Concept Question: What does it mean when fair value is paid to transfer a…

A: Fair Value: It is a measurement based on the current market situation. It is not specific to any…

Q: What is meant by a primary market transaction and a secondary market transaction? Give an example

A: Primary market are market where equity or bonds are issued to investors for the first time.So you…

Q: Explain the treatment of share issuance cost.

A: The monetary bookkeeping term stock issuance costs allude to the costs an organization brings about…

Q: Describe the relationship between collection float and firm liquidity.

A: The term "float" describes "the amount of money held in escrow between the moment a payment is…

Q: are broker markets and dealer markets? Distinguish between these

A: Broker market and dealer market are two different methods of trading in stock market.

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: Explain Important Terms Used in the Market for CMOs and Derivative Securities?

A: CMO (Collateralised Mortgage Obligation): The obligation to repayment ensured by the mortgage to be…

Q: Which of the following people represents several insurance companies but owns the policy…

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

Q: Critically evaluate interest rate swap agreements focusing on their significance and advantages in…

A: The agreements to exchange a number of payments on specified periods for a certain time are called…

Q: Differentiate between the following types of markets: physical asset vs. financial markets, spot vs.…

A: Note : As per the guidelines, only first three parts will be answered.

Q: How are derivatives recorded?

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

Q: What is a swap? Describe the mechanics of a fixed-rate swap and a floating-rateswap.

A: SwapsAn agreement amongst 2 counterparties i.e parties, a financial institution for the exchange of…

Q: QI: Explain in details the Liquidity gaps time profiles and how the gap profiles changes.

A: In finance, liquidity refers to the ability of a business or an individual of converting its assets…

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: 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: Differentiate between primary and secondary markets.

A: Primary market is a market where shares and securities are created and sold for the first time.…

Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.