Forwards and Futures: How are forwards and futures similar? How are they different? Briefly explain Advantages/Risks: What are the advantages and risks associated with these derivative instruments?

Q: Describe each of the following derivative instruments and suggest a specific risky situation that…

A: All of these derivatives instruments defined below.

Q: What is a FUTURES CONTRACT and what are its key components

A: Derivatives are those securities, the value of which depends on another security. There are few…

Q: Describe about different types of investment derivatives.

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: Distinguish between (2) spot and futures markets

A: A financial market is the market where financial assets are created and traded. Financial assets are…

Q: What are the main differences between options and warrant contracts and forward and futures…

A: The difference among options and warrant contract:

Q: What is basis risk in relation to futures contract hegding?

A: Basis Risk:Basis risk is a financial risk which arises from the incompatibility in the positions of…

Q: Discuss the factors giving rise to an inverted futures market for a storable versus a non-storable…

A: The inverted futures market for storable goods exists when the short-term deal costs are more…

Q: What is the difference between forward and futures contracts, focusing on the pros and cons of each

A: In certain ways future and forward deals are similar: both include the buying and selling of assets…

Q: What is a replicating portfolio, and how is it used to find the valueof a derivative security?

A: Portfolio is a collection of investments held by an investor. Replicating portfolio is a financial…

Q: Discuss the advantages and disadvantages of using options to hedge as compared to using futures…

A: Introduction: The future is the financial instrument of the derivative market in which a buyer and…

Q: Explain the main differences between futures contracts and forward contracts.

A: Solution- Future Contract-        A derivative may be a legal agreement to shop for or sell a…

Q: What impact does each of the followingparameters have on the value of a call option?(3) Option’s…

A: It is a contract to purchase a financial asset from one party and sell it to another party on an…

Q: Define the terms, or give short explanations.         -futures contract/option -hedge -hedger…

A: A derivative is a financial contract whose value is derived from the underlying asset, which could…

Q: The major difference between futures and options arises from the different obligations of buyers…

A: In futures contract, both the buyer and seller of the contract are obligated to buy and sell the…

Q: What is the key difference between futures contracts and options?

A: Both futures contracts and options are derivative instruments. Their value depends on the value of…

Q: Explain what is meant by forward contracts and futures using examples. List the main advantages /…

A: An option offers the holder of it the right, and not the responsibility, to buy or to sell an asset…

Q: Discuss how equity can be viewed as an option. Who has theoption, and what decision can they make?

A: If an enterprise cannot satisfy its contractual obligation of debt, it is in default for every…

Q: What is margin requirement (for futures)?

A: Solution:- A Margin Requirement is the share of marginable securities that an investor should pay…

Q: Options serve the same purpose as futures in that respect but are fundamentally different. How?

A: Options and futures are similar trading products that provide investors with the chance to make…

Q: How are derivatives recorded?

A: Derivatives:   Derivatives are some financial instruments which are meant for managing risk and…

Q: Describe forwards, futures, and swaps.  What are the features of each type of derivative and how are…

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: What is a futures contract?

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: Discuss the difference between forward and futures contracts, focusing on the pros and cons of each.

A: Hedge:   An investment strategy that is formed to reduce the risk of the adverse price movement of…

Q: Address the similarity and differences between option and forward/futures contracts.

A: An option contract is referred to as the promise, which used to meet the requirements regarding the…

Q: Explain why futures contracts may mitigate the credit risk involved in forward contracts.

A: Forward and future contracts are two types of risk management and hedging strategies.