The following statements relate to derivatives. Which of the following is FALSE? a. Swaps may have cashflows as its underlying assets. b. Options allow the buying party to pay a price for a chance to buy or sell the underlying asset . c. Futures are forward commitments. d. Futures and forwards may be contingent claims wherein the contract can be cancelled upon the agreement of both parties.

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

A: All of these derivatives instruments defined below.

Q: explain the general variables that one must consider when devising a hedge with futures.…

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Q: In the derivative markets a swap is: *       A. another name for a call option.       B. another…

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Q: Advantages of currency futures contracts relative to forward contracts include _     a. Higher…

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Q: Compare and contrast the commitments taken on by the following:   A futures contract seller versus a…

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Q: . Derivative securities are also called contingent claims because a. their owwners may hoose…

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Q: Which of the following is NOT true O a. Futures contracts nearly always last longer than forward…

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Q: sider a security that pays income to its holders (e.g., a dividend-paying stock, or a coupon bond).…

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Q: define and explain convenience yield, and describe how it is incorporated into the futures pricing…

A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

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

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A: There are mainly three types of derivative contracts. They are – futures, options and swaps.

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: Basis risk refers to the risk: a. associated with unanticipated price movements on the underlying…

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Q: a)explain current credit risk and potential credit risk.       b)describe the primary methods of…

A: The answers to the above question are given below :

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Q: describe the role of forward markets and futures markets in price discovery.   b)discuss three…

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Q: 2) Which of the following statements is FALSE? A) The option buyer, also called the option holder,…

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Q: A "cash and carry" transaction

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Q: A seller of a futures contract can choose not to deliver the underlying asset. True O False

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Q: Which is true about Futures contracts? a. is not traded on an organized exchange and is customized…

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Q: a) Define Forwards and Futures. b)Explain the differences between these instruments and how these…

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Q: A put option gives the owner (a) the right to sell the underlying security. (b) the obligation to…

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A: Risk is the uncertainty or potential loss in an investment decision.

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Swaps

A swap is a derivative contract in which two parties are agreed to exchange their cash flows from two different financial instruments for a defined period. In swap contracts, cash flows from one financial instrument are fixed and cash flow from other financial instruments is variable based on the interest rate, exchange rate, and commodity price. Swap contracts are transacted in an over-the-counter system. Swap contracts are utilized to hedge risk and mitigate loss.