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Q: Explain the difference between a call option and a long position in a futures contract.

A: Both the options and futures are derivative contracts.

Q: exaplain how the following assist in hedging when the currency depreciates forwards Futures…

A: Forward contracts- Currency forward contracts, are an agreement to exchange certain amounts of…

Q: In the derivative markets a swap is: *       A. another name for a call option.       B. another…

A: The swap refers to the exchange. In the financial derivatives market, swaps are used for…

Q: Advantages of currency futures contracts relative to forward contracts include _     a. Higher…

A: A futures contract is a legal contract to purchase or sell an underlying asset or security at a…

Q: Compare and contrast the commitments taken on by the following:   A futures contract seller versus a…

A: A futures contract seller is a party who has agreed to sell a particular asset at a particular…

Q: detail two procedures which the seller of a futures contract can use to lock in a gain at some time…

A: A futures contract is a legally binding agreement to acquire or sell a certain commodity, asset, or…

Q: Borrowing Choose.. V Choose... Contract No es Contract Yes Choose... n contract Choose... rd…

A: There are many instruments available for hedging the receivables.

Q: In the futures markets the buyer of a financial futures contract: a. has the obligation to deliver…

A: A future contract is a legal agreement to buy or sell a particular commodity at predetermined price…

Q: A "cash and carry" transaction

A: Arbitrage is the strategy utilized by the investors, in which they make benefit of the asset…

Q: Discuss the objectives of a clearing house in the future market.

A: A clearing house act as an intermediary between the buyers and sellers of financial instruments.…

Q: Explain what is meant by “initial margin” on a futures contract

A: A futures contract is a type of common financial agreement that specifies a future date and price at…

Q: Futures trading arrangements ensures that the seller of the futures contract will deliver the…

A: The main role of a Clearing house is to perform the duty of a mediator between two parties entering…

Q: Explain why a futures contract can be used for either hedging or speculation.

A: Hedging and speculation are the strategies which are used by investors while trading. Hedging is…

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: 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: An agreement between two parties to exchange a series of specified periodic cash flows in the future…

A: In derivatives, there are forward contract, future contract, option contract as well as swap…

Q: In an interest swap contract, the exchange of cash flow calculated in each period is based upon the:…

A: Interest rate swaps are entered by the parties to obtain a lower interest or to either increase or…

Q: What is the main purpose of a hedging strategy using a forward contract or a futures contract?…

A: Hedging-It is a risk management strategy undertaken by individuals, investors, corporates to offset…

Q: Interest-rate swaps are: Answer a. Exchanges of equity securities for debt securities b. Agreements…

A: Interest Rate Swaps are one of the type of swap contract. It is an agreement to hedge the interest…

Q: Briefly discuss the relative advantages and disadvantages of an exchange-traded futures contract…

A: Futures contract is referred to as the legal agreement for purchase or sell of the specified or…

Q: A swap contract Select one: A. relates to the trading of an asset owned by one company for another…

A: A swap contract is an agreement between two parties to exchange their liabilities with each other…

Q: In the context of financial derivatives, what is a futures contract? A) An agreement to exchange…

A: A future contract is a standardized financial derivative that binds two parties to purchase or sell…

Q: Define each of the following terms: c. Financial futures; forward contract

A: Financial futures can also be called as futures helps in trading of non physical assets either for…

Q: Interest Rate Swap: A company that expects interest rates to rise and wishes to exchange its…

A: An interest rate swap is a financial derivative contract between two parties that involves the…

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: (a) Outline in detail what is meant by a forward and futures contract. Evaluate the relationship…

A: Derivatives is a type of security, because their value is based on an underlying asset that is than…

Q: A futures contract is an agreement that specifies the delivery of a commodity or financial security…

A: The investors or traders can trade in the equity shares of the company by buying and selling the…

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.