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.…

A: When devising a hedge with futures, there are several variables that must be considered to ensure…

Q: Which of the following is True? a. Call option and Put option are identical derivatives contracts…

A: If the buyer of a short call option exercises the right to buy the underlying asset from the seller…

Q: Define the terms, or give short explanations.               -short sale/short selling…

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

Q: Swap transactions are typically heterogeneous in terms of maturities, indexes, used to determine…

A: Swap transactions are derivatives transactions

Q: One of the differences between a forwardand a futures  contract is  forward contracts are…

A: Forward Contract is a customized contract between two parties to buy or sell a asset at a particular…

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

A: A futures contract seller is a party who has agreed to sell a particular asset at a particular…

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

A: The following is not true:Answer: Futures contracts nearly always last longer than forward…

Q: onvertible bond B. none of these c .non convertible bond + call option d .non convertible…

A: Step 1 Convertible bondholders receive newly issued securities in the form of shares when they…

Q: Hedgers can enter into an insurance policy, also known as a financia contract, also known as a…

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

Q: The seller of a put option is not necessarily the seller of the underlying asset. True False

A: The options can be sold even though the underlying assets are not held by the option sellers.

Q: Choose which sentance is false.       A. When you own a call​ option, you have the right to buy the…

A: The option contracts are the derivative financial instruments that can be classified as the call…

Q: The buyer of a Put Option, is obligated to sell the underlying stock at maturity. True O False

A: Option gives the right to buy or sell an asset at exercise price at maturity. Two parties will be…

Q: Which of the following best describes the terms 'long position' and 'short position' in trading?…

A: Trading in the financial markets is often based on speculating future price movements of assets such…

Q: By acting as the counterparty to every futures position, the exchange eliminates the A) market B)…

A: The correct answer to the question is "B) credit".Credit risk is the risk that there will be a…

Q: what is the Difference between derivatives and insurance contract

A: Derivatives and insurance contracts are both financial instruments used for managing risk, but they…

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

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

Q: If spot price falls below the exercise price, seller of a futures contract makes a ______ while…

A: Futures . Futures are derivative that are entered to mitigate risk with regard to price movements.…

Q: A "cash and carry" transaction

A: Arbitrage is the strategy utilized by the investors, in which they make benefit of the asset…

Q: In Swap contract one counter party has an obligation but not right, while in an option contract the…

A: Swap is a contract between two parties to exchange cash flows of a contract to each other. The leg…

Q: What is an interest-rate futures contract? How does it differ from an interest-rate forward…

A: Since you have posted multiple independent questions, according to the guidelines, only the first…

Q: Can you please help with the question in the picture attached? The answer should be only one and I’m…

A: The correct answers are:B. At the point of buying a futures contract the buyer does not know the…

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: Which type of financial derivative is used to protect against adverse price movements in an asset?…

A: Financial derivatives are instruments whose value derives from the underlying assets or securities,…

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

A: Future Contracts refers to a legal agreement or contract between the buyers or sellers to buy…

Q: Futures contracts offer more flexible terms than a forward contract. True False

A: Futures and Forward contracts are contracts which allows to buy or sell an underlying asset at a…

Q: derivative is a financial instrument whose value is determined by _____________________.  (Select…

A: A derivative is a financial instrument, the value of which is determined by the performance of the…

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

A: A futures contract is an agreement between two parties to acquire or sell an item at a specific time…

Q: One can use Black-Scholes model to price any financial derivatives. true or false

A: The Black-Scholes model was specifically designed to value European-style options on non-dividend…

Q: A derivative security derives its value from another previously issued instrument (a stock or bond).…

A: Derivatives can be used to for hedging or arbitrage purpose.

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.