Which type of financial derivative is used to protect against adverse price movements in an asset? A) Call option B) Put option C) Futures contract D) Swap contract
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- a) Define Forwards and Futures. b)Explain the differences between these instruments and how these derivatives are used to mitigate risk. nb: answer question a and bWhich of the following is true about derivatives? a. Value of derivative is derived from predetermined asset b. The terms and conditions are flexible under derivative trading c. Derivative markets are suitable for low risk investors d. Risk on derivatives market are always low no need for explaination ..please only give answerForwards 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?
- A derivative is a financial instrument whose value is derived from the underlying asset. It’s an agreement that has theability to move risk from one party to another. With this in mind, discuss the advantages associated with use of Derivativesas a financial instrument.Question 4 In the context of options, what is the "premium"? A) The cost of entering into the option contract B) The profit made from exercising the option C) The market price of the underlying asset D) The expiration date of the optiona) Futures contracts and options on futures contracts can be used to modify risk.Required:Identify the fundamental distinction between a futures contract and an option on a futures contract and explain the difference in the manner that futures and options modify portfolio risk
- a) Futures contracts and options on futures contracts can be used to modify risk. Required:Identify the fundamental distinction between a futures contract and an option on a futures contract and explain the difference in the manner that futures and options modify portfolio risk.Describe each of the following derivative instruments and suggest a specific risky situation that the derivative could be used to mitigate: Forward or Future• Swap• Call Option• Put OptionA derivative is a financial instrument whose value is determined by A. an underlying security. B. a regulatory body such as the SEC. C. futures and options. D. None of these options are correct.
- What is the correct strategy when the asset backing the futures contract differs from the asset whose price is being hedged? O Short hedge O Long hedge O Perfect hedge O Tailing the hedge O Cross hedge4 2. What is the major difference in the obligation of one with a long position in a futures (or forward) contract in comparison to an options contract?Changes in what price lead to gains and/or losses in futures contracts?