A person who takes a short position in the futures market benefits from none of the answers are correct a rise in price of the underlying asset Oa fall in price of the underlying asset both a fall and rise of the underlying asset

Q: "Futures contracts allow individual investors to protect themselves against volatility in interest…

A: Future contracts are derivative contracts which allows investors to purchase a security/commodity or…

Q: Which statement is true about the difference between futures and forward contracts?

A: The true statement about the difference between future and forward contracts is:3. Futures contracts…

Q: Why might individuals purchase futures contracts rather than the underlying asset? What is the…

A: The concept of future contact is associated with management of risk or uncertainty of business…

Q: Which of the following are TRUE regarding the differences between futures and forward contracts?…

A: Futures contracts are contractual agreements between a buyer & a seller to buy or sell an…

Q: Futures trading halts when daily price limits are reached. O True O False

A: Futures trading:- Futures trading are financial derivatives that bind the parties to trade an item…

Q: 1.The coefficient of risk aversion can be used to create indifference curves. The higher the A, the…

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

Q: Derivative securities play a large and increasingly important role in financial markets. These…

A: Derivative securities are financial instruments whose value is derived from, or dependent on, the…

Q: Derivatives are used both to hedge against risk and to acquire risk, both of which are geared…

A: Hedging is a risk management technique used in financial management in order to offset losses in…

Q: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: 21 Which one of the following best describes the purpose of derivatives markets? Multiple Choice…

A: In this question, we are required to determine the primary purpose of derivative contract.Derivative…

Q: Which of the following statements is correct?  A. An option seller makes more profits than an…

A: The future contract is a type of derivative contract which will result into no profit no loss on the…

Q: . Derivative securities are also called contingent claims because a. their owwners may hoose…

A: Derivative securities are securities whose payment completely depends on the value of other assets.…

Q: A disadvantage of holding TIPS is A If inflation does not occur then the value of holding TIPS…

A: Several statements have been given as disadvantages of TIPS. We have to find the correct one.

Q: Which of the following is always negatively related to the price of an American call option on a…

A: Volatility and price are inversely related. Answer is volatility.

Q: Which of the following is NOT true O a. Futures contracts nearly always last longer than forward…

A: The following is not true:Answer: Futures contracts nearly always last longer than forward…

Q: Which of the following is true? O The convenience yield is strictly positive. O The convenience…

A: Convenience yield is the implied return when an ivestor holds any consumption asset such as…

Q: Assume that F₁ and F₂ are the futures prices of two contracts on the same non-dividend- paying…

A: Arbitrage opportunity: It is the opportunity under which the same commodity holds two different…

Q: After paying the initial margin, a futures investor does not have to pay any additional money until…

A: Initial margin is the amount of margin which needs to be deposited by the investor before entering…

Q: Explain why speculating in derivatives, futures contracts and options is not appropriate for the…

A: Speculation regulates the international financial system. Future action in stock market is dependent…

Q: Which of the following best describes the terms 'long position' and 'short position' in trading?…

A: Trading in the financial markets is often based on speculating future price movements of assets such…

Q: By acting as the counterparty to every futures position, the exchange eliminates the A) market B)…

A: The correct answer to the question is "B) credit".Credit risk is the risk that there will be a…

Q: Users of commodities are:   a. Usually not participants in futures contracts. b. Speculators…

A: The term commodity refers to the goods that can be exchanged with other goods or for money like oil,…

Q: If spot price falls below the exercise price, seller of a futures contract makes a ______ while…

A: Futures . Futures are derivative that are entered to mitigate risk with regard to price movements.…

Q: The basis is defined as the spot price minus the futures price. A trader is hedging the sale of an…

A: We have to find the impact of the unexpected fall in basis on the short position.

Q: A position in T-bond futures should be used to hedge falling interest rates and a position in T-bond…

A: A long position in a financial instrument means the holder of the position owns a positive amount of…

Q: Which type of financial derivative is used to protect against adverse price movements in an asset?…

A: Financial derivatives are instruments whose value derives from the underlying assets or securities,…

Q: which one is correct please confirm? Q20: The main advantage of using options on futures contracts…

A: Options and futures contracts are two different alternatives to minimise the risk by setting a…

Q: nvestors choose deri tives

A: derivatives are financial instruments whose value is derived from an underlying asset such as bonds…

Q: Normal vs inverted futures market What is a normal market for futures? What (a) ( does an inverted…

A: Futures market can be defined as a market in which the futures contracts are purchased & sold by…

Q: Derivative securities play a large and increasingly important role in financial markets. These…

A: These are the financial markets that include futures contracts, options, forwards, and swaps, whose…

Q: A seller of a futures contract can choose not to deliver the underlying asset. True O False

A: Future Contracts refers to a legal agreement or contract between the buyers or sellers to buy…

Q: 3. Why is the initial value of a futures contract zero? a. impossible to tell b. the futures…

A: Answer:- c. You do not pay anything for it. EXPLANATION:- A futures contract is an agreement between…

Q: The CAPM states that expected returns depend on an asset’s loading on market risk.

A: CAPM stands for capital asset pricing model. This model was developed by William. F. Sharpe. As per…

Q: 6. Which one of the following statements is incorrect regarding the margining of exchange-trade…

A: The future contract is a type of exchange traded contract which is standardised in nature and which…

Q: QUESTION 21 How does the presence of a convenience yield typically impact the pricing of futures…

A: Solution:Convenience yield means the benefit or satisfaction level of having the underlying asset…

Q: a) We can eliminate market exposure from our portfolio by shorting S&P500 index. Why bother with…

A: If the elimination of market exposure from our portfolio can be done by shorting the S&P500…

Q: b) wri fi 2 bj We can eliminate market exposure from our portfolio by shorting S&P500 index. Why…

A: Future Market is an auction market in which the participants buy and sell commodities and futures…

Q: The basis is defined as spot minus futures prices.   Evaluate which of the following is most…

A: The basis is described as the disparity between spot and futures prices based on the information…

Q: Multiple Choices: 1. What happens to a premium for a call option if the underlying futures price…

A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…

Q: The pay off from an option depends on the market price of the underlying asset a) a put holder…

A: The put option is a financial derivative instrument which derives its value from the underlying. A…

Q: The forex spot market is an over - the - counter market Select one : True or False

A: Stock market is a public market which exist for buying, selling and issuing stocks that traded on…

Q: The swap premium on a credit default swap index will increase after a default. O True O False

A: Credit default swap index The credit default swap index is referred to as the benchmark that was…

Q: Which of the following is/are true about the current market value of a derivative instrument?…

A: Derivative instruments are those instruments which derive their value from an underlying asset like…

Q: The basis is defined as the spot price minus the futures price. A trader is hedging the sale of an…

A: The objective of the question is to understand the impact of a decrease in the basis on a trader who…

Q: The ability to buy on margin is one advantage of futures. Another is the ease with which one can…

A: The question is based on the concept of future derivative contract, which is define as an exchange…