financial risk management  strategies using derivatives instrument to maximise profits. Select one: True False

Q: Compare long-term instruments and short-term risks, in terms of the various types of risk to which…

A: Risk Is said to be the uncertainty or the deviation from the actual so this is that part of the…

Q: Among the factors considered in the quantitative models of default risk: a. Business cycle b.…

A: Business cycle is defined as an economic cycle that is linked with fluctuation of the GDP in its…

Q: How the following risk can be mitigated and managed 1. Market risk 2. Liquidity risk 3. Insolvency…

A: Market risk is also known as systematic risk, that involves uncertainty with any investment…

Q: Hedging is a risk management strategy that is used in limiting or offsetting probability of loss…

A: Financial risk managers analyse the market trend and accordingly take financial decisions.Roles and…

Q: Equity investors expect to be compensated for two things

A: In financial terms, risk can be defined as the possibility that the real profits from an outcome or…

Q: what is a credit risk, market risk and business risk. Give some examples. How can you hedge them?

A: The risk is referred to as the probability that actual results will be different from the expected…

Q: A derivative is a financial instrument whose value is derived from the underlying asset. It’s an…

A: A derivative is a type of financial contract whose value is determined by the value of an underlying…

Q: Which of the following is NOT an external method of interest rate risk management? *       A. Using…

A: An interest rate risk is the risk of negative affected of the value of an investment by unexpected…

Q: xplain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they…

A: Stand-alone In terms of how they are calculated and analyzed, risk and portfolio risk are not the…

Q: o risk premiums influence financial decisions regarding risk and re

A: Step 1 A risk premium is an investment return that is expected to generate more than the level of a…

Q: This is a generalized framework for analyzing the relationship between risk and return: a. capital…

A: Risk refers to the uncertainty related to the investment within the future. Risk arises within the…

Q: Hedging is a risk management strategy that is used in limiting or offsetting probability of loss…

A: Financial risk managers analyse the market trend and accordingly take financial decisions. Roles and…

Q: Which of the following is a characteristic of a money market financial instrument?

A: Money market financial instruments are those instruments which have short maturity period of up to a…

Q: nvestors choose deri tives

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

Q: The Capital Asset Pricing Model (CAPM) considers which type of risk in pricing the expected returns…

A: Capital Asset Pricing Model is used for pricing risky securities. It describes the risk and return…

Q: What is definitions of this?   Systematic risk  Risk free rate of return  Market rate of…

A: Capital asset pricing model (CAPM) can be used to compute the return expected by the investors by…

Q: Derivatives are obtained to be used as hedging instrument to manage some kind of risk. for…

A: Derivatives are the type of instrument which is used for financial asset, liability or trading…

Q: hich of the following is not an advantage of a repurchase agreement (repo) market? a.…

A: A repurchase agreement (repo) is a form of short-term financial support for government mortgage…

Q: Explain what is meant Market Risk and by Specific risk. How can an investor reduce these risks?

A: Risk is referred to as the chance that an outcome or an investment's actual gains will differ from…

Q: Derivatives are used in risk management because they _____. a. diversify risks b. hedge risks c.…

A: In the world of Finance, risk can be classified into various types, such as :- Credit risk - It is…

Q: a)define interest rate swaptions, and differentiate between payer swaptions and receiver swaptions.…

A: The Swap contract is financial agreement between two parties these contract involve variety of…

Q: Define systematic and unsystematic risk. What method is used to measure a firm's market risk?

A: Risk -It is the volatility of returns. There are several types of risks: i) Systematic risk ii)…

Q: which of the following risks is most closely associated with off balance sheet? trading risk

A: Off balance sheet practice means when some liabilities and assets are not part of company's balance…

Q: Counterparty credit risk is a function of the probability of default, exposure at default, and loss…

A: A counterparty may default its payments and the risk a company face due to this default is known as…

Q: How should derivatives be used in risk management? What problems can occur?

A: Derivatives are financial instruments that have values derived from other assets like stocks, bonds,…

Q: 1.What is the relationship between an investment’s risk and its return? Please provide examples if…

A: Note:  As per our policy, we only answer one question, when more than one question is posted. The…