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- Select all statements which are correct. As the delivery month of a futures contract is approached, the futures price converges to the spot price of the underlying asset. In case the balance on the margin account falls below the maintenance margin, there is a margin call and a deposit must be made to bring the balance back to the initial margin. A futures contract is very similar to a forward contract. The major difference is that futures contracts are traded on an exchange and settled daily, whereas forward contracts are traded over-the-counter and are only settled at maturity.In the futures markets the buyer of a financial futures contract: a. has the obligation to deliver the underlying financial asset at the specified future date. b. takes the short position. c. takes the long position. d. has to record the contract with the clearing house.A futures contract is an agreement that specifies the delivery of a commodity or financial security at a:* A. predetermined future date with a price to be negotiated at the time of delivery B. predetermined future date with a currently agreed-on price C. currently agreed-on price, with a delivery date to be negotiated later D. predetermined future date with a price and delivery to be negotiated later
- A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. e b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position.“ Date Action Sell March Futures Buy March Futurese Sell May Futures Buy May Futuresa Sell July Futuresa Buy July Futuresa Sell September Futurese Buy September Futures Sell December Futures Buy December Futures Sell Cash Inventory Price February 6 March 15e $5.73e $6.20 $5.90 $5.10 $5.30 $5.70 March 15e May 16e May 16 July 22 $6.20 $6.90 $6.95e $6.50 $6.45 July 22e September 17 September 17 December 12e December 12We define basis as futures price minus cash price. In general, what is the expected sign of the basis one month prior to expiry for oil sold on the spot market at the futures contract’s delivery location? (i) positive (ii) negative (iii) zeroWhich of the following increases basis risk? Select one: O a. A large difference between the futures prices when the hedge is put in place and when it is closed out O b. Dissimilarity between the underlying asset of the futures contract and the hedger's exposure O c. Areduction in the time between the date when the futures contract is closed and its delivery month O d. None of the above
- Which of the following increases basis risk? Select one: O a. Alarge difference between the futures prices when the hedge is put in place and when it is closed out O b. Dissimilarity between the underlying asset of the futures contract and the hedger's exposure Oc. A reduction in the time between the date when the futures contract is closed and its delivery month O d. None of the aboveIndicate the type of hedge each activity described below would represent. Activity 1. An options contract to hedge possible future price changes of inventory. 2. A futures contract to hedge exposure to interest rate changes prior to replacing bank notes when they mature. 3. An interest rate swap to synthetically convert floating rate debt into fixed rate debt. 4. An interest rate swap to synthetically convert fixed rate debt into floating rate debt. 5. A futures contract to hedge possible future price changes of timber covered by a firm commitment to sell. 6. A futures contract to hedge possible future price changes of a forecasted sale of aluminum. 7. ExxonMobil's net investment in offshore drilling operations in Brazil. 8. An interest rate swap to synthetically convert floating rate interest on an available-for-sale debt investment into fixed rate interest. 9. An interest rate swap to synthetically convert fixed rate interest on a held-to-maturity debt investment into floating rate…Given the following information for December 24 corn futures, identify the "In the Money", "At The Money", and "Out of the Money" 22 puts and Calls. The December 24 futures price is $4.71. Also, calculate the intrinsic and extrinsic values of the premiums. 24 25 26 27 28 29 30 31 32 33 34 35 36 37 \table[[Strike,Premium],[Prices,Puts,Monies],[5.2,0.655,Out],[5.1,0.583,In],[5,0.513,At],[4.9,0.447,Out],[4.8,0.386,],[4.7,0.33,],[4.6,0.276,],[4.5,0.227,],[4.4,0.185,],[4.3,0.147,]] \table[[Puts,,],[Intrinsic,Extrinsic,Calls],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]
- The daily settlement of obligations on futures positions is called _____________. Group of answer choices initial margin requirement a margin call a variation margin check marking to marketWhich of the following statements describes money market securities? Group of answer choices Money market securities are long-term claims with an original maturity that is generally more than one year. Money market securities are short-term claims with an original maturity that is generally two years or less. Money market securities are short-term claims with an original maturity that is generally six months or less. Money market securities are short-term claims with an original maturity that is generally one year or less.34) What is an interest-rate futures contract? How does it differ from an interest-rate forward contract? 35) Explain using an example the statement that "at the expiration date of a futures contract, the price of the contract is the same as the price of the underlying asset to be delivered." 36) Where are financial futures traded? Describe that market.