d. Forward contracts are not traded in any exchanges across the world.

Q: Which one of the following statements concerning forward contracts is true? Forward contracts are…

A: Forward contracts are a derivative instrument in which two parties enter in to an agreement to buy…

Q: The Happy Orange Storage Company stock was selling at $40 per share on the first day of this month.…

A: 1. If the stock price is $40 and strike price is $36 and put option expires today itself, then the…

Q: 14. True or False: The value of a swap contract is generally zero at origination and can change…

A: A swap contract is a derivative instrument where the signing parties exchange cash flows or…

Q: To replicate a short asset position with options a trader would: Short two ATM call contracts and…

A: The correct choice is:B. Short an ATM call and long ATM putExplanation:Explanation of the…

Q: In a money-market hedge you either borrow or invest in a foreign currency at foreign…

A: The question is related to Foregin Exchange. The Interest rate parity states that interest rate…

Q: A. are only used by foreign currency traders to speculate on currency fluctuations. B. are generally…

A: Financial derivative: Derivative is a contract between two parties whose value is based on the…

Q: .Under a cash and carry arbitrage, which of the following is correct? a) If the futures contract is…

A: Hi, since you have posted multiple questions, we will answer only the first one, as per the…

Q: Given the following American put option prices and current underlying share price of $304.75, check…

A: Strike            Put price 300                 7.75 305                 8.15 310…

Q: The following payoffs are observed in frictionless markets: Select one: O A. O B. O C. O D. Dividend…

A: Solution:Arbitrage means earning profit without taking risk and without investing money.At…

Q: When there are no trade costs, which of the following conditions exist? There is no arbitrage. The…

A: (i) Arbitrage exists due to differences  of prices in different markets. So If there are no trade…

Q: Companies often use derivatives to reduce the risk of adverse changes in all of the following…

A: Risk Management -Risk management includes identifying, analyzing, and responding to various risk…

Q: A firm gives all its employees American-style call options on the firm's stock. The options have a…

A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…

Q: Which of the following activities or transactions would most likely face right-way risk of…

A: A derivative does not have its own value, it has got derived value from the underlying assets.…

Q: Which of the following statements about European option contracts is true? Question 2Answer a.…

A: The objective of the question is to identify the correct statement about European option contracts…

Q: Which of the following statement is INCORRECT?

A: Option contract is a contractual agreement between the buyer and the seller. In the option…

Q: Exchange rate fluctuations can be used as a tool of speculation by speculators. Make an example of…

A: Speculators who anticipate rising prices want to make a profit by buying futures contracts.…

Q: If S($/£) = $1.25/£; F360($/£)=$1.10/£; i$=7.04%; if=11.50%, to hedge foreign ex interest arbitrage:…

A: Based on interest rate parity the spot rate and forward rate should be in equilibrium based on the…

Q: If I sell an at-the-money put option on the Euro and delta hedge it with a position in Euro…

A: Answer: option (b) I will need to sell Euro if the Euro strengthens. A put option in the money if…

Q: A call option written on a foreign currency without owning the underlying stock: a) can subject the…

A: Call option is that there will be gain on the currency in the future.

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: How do I backdate settlement prices on the Chicago Mercantile Exchange? Or is there another exchange…

A: Backdate settlement is not allowed C mercantile exchange as it is illegal and no other exchange…

Q: Which one of the following statements is correct for an interest rate swap? A. There is an exchange…

A: interest rate swap is the exchange of  future interest payment with other type od future interest…

Q: ketable equity security to Y.For each of the following transferprovisions [considered…

A: Call Option -Options on stocks, bonds, commodities, and other financial instruments that grant the…

Q: Since the U.S. company is a buyer, should not it focus on either a Forward contract or a "Call…

A: We have to comment on the selection of the options and the forward contract.

Q: Imagine that parties W, X, Y, and Z enter into CDS contract on the reference entity A. The figure…

A: Option (a) W: This option is incorrect because W is not isolated from the risk of default. W buys…

Q: Choose the correct answer and give short explaination. 3. Advantages of a fixed exchange rates…

A: Fixed exchange rate means that the exchange rate for business transaction between 2 parties in…

Q: A major risk faced by a swap dealer is exchange rate risk. This is   a)the probability exchange…

A: Exchange rate risk, also known as currency risk, is the financial risk posed by an exposure to…

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.