Critically discuss the use of forwards vs. futures instruments within  firms and how these can be used in order to mitigate financial risks.  Provide examples to support your answers.

Q: Give a detailed account of the roles of the two (2) main participants in the futures markets.…

A: Futures markets: The futures markets are a market place where contracts to purchase and sell…

Q: Describe the basis of Futures contracts and discuss the potential risks and rewards.

A: An agreement where there are two parties, say one is a buyer and another one is a seller decides to…

Q: he best answer with respect to a stock's "alpha"? (In a CAPM world) Group of answer choices The…

A: Alpha of the stock or portfolio is risk adjusted performance given by the portfolio and how much…

Q: A. = 10% respectively. Their respective betas are Bp = 1 and Ba E(ra) rate is 5% and the borrowing…

A: An arbitrage pricing theory means the balance of the actual gain and predicted gain. It is based on…

Q: Asset allocation is the decision of how you divide your investment portfolio between various assets.…

A: First, we need to identify Samantha's investment profile. From the information given, we know that…

Q: Describe indexes within the international securities context. What are indexes, and why are they…

A: Index reflect the overall performance of stocks in the market.  A company has to fulfill certain…

Q: Portfolio management requires the knowledge of knowing the correct combination of stocks, bonds,…

A: Portfolio management is the selection, prioritisation and control of an organisation's programmes…

Q: do you believe there is a need for them as hedging vehicles in corporate finance? If so, how would…

A: Derivatives are financial instruments whose value is derived from the value of an underlying asset,…

Q: Which of the following way to classify and measure financial instruments do you favor?  Justify your…

A: Option 1).  IFRS 9: See page 7 of IFRS 9-Project-Summary.pdf.  Then click OK.

Q: A fundamental analyst uses the discounted cashflow method to value firms, and has a short-term…

A: Fundamental Analysis is a technique to value firms on the basis of their fundamentals i.e. their…

Q: The creation of different payment tranches in a CMO allows investors to better tailor their…

A: CMO creates tranches with various bond classes.

Q: Sensitivity analysis, scenario analysis, and Monte Carlo simulations all help us determine: Initial…

A: In financial analysis, various tools are employed to assess and understand different aspects of…

Q: Explain the role of speculators in determining the price of a security on the stock market

A: Stock market are platform where there is trading of stocks happen so there is buying and selling of…

Q: Critically explain the role and objectives of the main participants in the derivatives market.…

A: Derivative market is market which include the market for futures or options which are based on the…

Q: Explain with examples how a firm can hedge its risks using options

A: Hedging : Hedging can be understood as the  technique for risk management used to mitigate…

Q: With the help of examples, explain how futures contracts can be used to reduce systematic risk in…

A: The future contract are important part of hedging and other strategy.   The value is based on the…