Fin 4910/6990 Further Questions Problem 7.19 (a) Company A has been offered the rates shown in Table 7.3. It can borrow for three years at 6.45%. What floating rate can it swap this fixed rate into? (b) Company B has been offered the rates shown in Table 7.3. It can borrow for 5 years at LIBOR plus 75 basis points. What fixed rate can it swap this floating rate into? (a) Company A can pay LIBOR and receive 6.21% for three years. It can therefore exchange a loan at 6.45% into a loan at LIBOR plus
Premium Put option Call option Option
is baWhy Options Are Better Than Futures For Hedging Futures trading can be used for two main purposes; Speculation and Hedging. While most retail futures traders get involved in futures trading for the purpose of leveraged speculation‚ it cannot be forgotten that the true purpose of futures contracts is for the purpose of hedging. Hedging using futures is technique most professional money managers use for decades. However‚ there is one main problem with hedging using futures and that is the
Premium Futures contract Derivative Derivatives
Hedging Strategies using Futures Introduction to Hedging Hedging refers to reducing risk. Let us take a simple example to understand hedging. A farmer expects to produce ‘X’ quantity of a commodity by the end of the cropping season say‚ October. He has to invest a certain amount of money today from his savings or maybe take a loan in expectation of returns he will get in October. But‚ he cannot accurately predict the prices he will get for his produce. A dip in prices could result in a loss. To deal
Premium Futures contract Forward contract Derivative
------------------------------------------------- CASE: ENRON CORPORATION’S WEATHER DERIVATIVES WEATHER RISK: Seasonal temperature levels and its fluctuations are the most important independent variable in the power business because they determine to a very large extent customer demand. The utility industry measures weather conditions in terms of heating or cooling degree-days (HDD and CDD‚ respectively). Degree-days are determined by the deviation of the average daily temperature from an established
Premium Weather Strike price Derivative
WELLS FARGO & COMPANY RISK MANAGEMENT APPROACH According to the Risk Management section of Wells Fargo’s 2011 Annual Report‚ to be successful they manage and control three major business risks: credit‚ asset/liability‚ and market risk. As for this paper‚ I’m only going to discuss about their credit and interest rate risk‚ which is managed under their asset/liability section. Wells Fargo has continued to invest in its risk infrastructure especially since it is a larger and more complex company
Premium Risk management Debt Interest
other. When Barings Bank‚ the oldest merchant bank in London‚ collapsed in 1995 after one of the bank’s employees lost £827 million due to speculative investing‚ primarily in futures contracts‚ it illustrated the extreme danger and volatility of derivatives. Options and futures can be used to eliminate‚ reduce‚ hedge and manage risk‚ but can also be highly speculative. Foreign currency futures are standardized contracts to buy or sell a specified commodity of standardized quantity at a certain date
Premium Foreign exchange market Derivative Option
there was no actual earmarking or physical segregation of the wine sold to different customers. The wine company became insolvent‚ and the receiver claimed that all the wine still belonged to the company – a claim that was upheld. 3. The rules of equity cannot provide a solution to this problem. There is no room in sale of goods law for the notion that an equitable title might pass or an equitable interest be created‚ however well established
Premium Ownership Property Property law
| Contents | Page No: | 1. | List of Authorites (Cases & Statutes) | 2 | 2. | Answers (Mainbody & Conclusion) | 3-10 | List of Authorities: Cases : 1. Crabb v Arun 2. Central London Property Trust Ltd v High Tress House Ltd 3. Ramsden v Ryson 4. Willmott v Barber 5. Taylors Fashions Ltd v Liverpool Victoria Trustees Co. Ltd 6. Matharu v Matharu 7. Taylors Fashions Ltd v Liverpool Trustees Co 8. Gillet v Holt 9. Dillwyn v Llewellyn
Premium Property Common law Real property
Events leading to Barings Bank’s collapse Barings Bank’s activities in Singapore between 1992 and 1995 enabled Nick Leeson to operate effectively without supervision from Barings Bank in London. Leeson acted both as head of settlement operations (charged with ensuring accurate accounting) and as floor manager for Barings’ trading onSingapore International Monetary Exchange‚ or SIMEX. This placed Leeson in the position of reporting to an office inside Barings Bank which he himself held. Because
Premium Barings Bank Nick Leeson Derivative
the time of the original shares and the cost of the original shares will be spread over all the shares. See s.130-20 Seminar reflection Value-shifting is a result of a transaction between two parties that is not at market value‚ the value of an equity or loan interest is increased
Premium Lease Trust law Stock market