Corporate Finance Problems and prospects of future contracts and options. Acknowledgement While doing this assingment we were lucky to have some assisstance from different personnels. At first we wan to mention about our honorable course instr-uctor Md. Omar Faruque. He helped us by providing a proper guideline on how to prepare this assingment. He also encouraged us to prepared the assingment in a timely and efficient manner. Now we want to mention some other persons contribution. Mr
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time in future. When the enters into a short forward contract‚ he/she is agreeing to sell the underlying asset for a certain price at a certain time in future. 2. Explain carefully the difference between hedging‚ speculation‚ and arbitrage. Ans: A trader hedges when he/she has an exposure to the price of an asset and takes a position in a derivative to offset the exposure. In the case of speculation‚ the trader has no such exposure to offset. The trader is simply betting on the future movements
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CHAPTER 8 Currency Futures and Options Markets EASY (definitional) 8.1 Which one of the following currency futures contracts is currently NOT available? a) French franc b) Hungarian forint c) Czech koruna d) Norwegian krone Ans: a Section: Futures contracts Level: Easy 8.2 Which of the following has provided a major inducement for speculators to participate in the futures market? a) low margin requirements b) low bid‑ask spreads c) high volume compared to the forward market d)
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PROJECT REPORT ON “TRADING & CLEARING MECHANISM & REGULATORY FRAMEWORK FOR FUTURES AND OPTIONS” SUBMITTED BY (10018‚ 10028‚ 10040‚ 10073) SUMITTED TO PROF. Dr SAMPADA KAPSE. PGDM PROGRAMME (YEAR: 2010-12) TOLANI INSTITUTE OF MANAGEMENT STUDIES ADIPUR Overview TRADING MECHANISM In Indian context the futures & options traded on NSE is called NEAT-F&O trading system. Entities involved in trading system are: 1. Trading members. 2. Clearing members. 3. Professional clearing members
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Fundamentals of Futures and Options Markets‚ 8e (Hull) Chapter 1 Introduction 1) A one-year forward contract is an agreement where A) One side has the right to buy an asset for a certain price in one year’s time B) One side has the obligation to buy an asset for a certain price in one year’s time C) One side has the obligation to buy an asset for a certain price at some time during the next year D) One side has the obligation to buy an asset for the market price in one year’s time Answer:
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1. As an option writer‚ what is the best option to take when you forecast the market to be bullish? Sketch the profit/loss diagram and determine the in the money‚ out of the money and at the money. 2. The call option of Diamond Bhd stock has a striking price of RM30 and a cost of option RM2 per share with one month expiration date. The current market price of share is RM26. If you buy 3 lots (1 lots = 100 shares) of shares‚ calculate the profits or losses at the expiration date for each of the
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Problem 1.8. Suppose you own 5‚000 shares that are worth $25 each. How can put options be used to provide you with insurance against a decline in the value of your holding over the next four months? You should buy 50 put option contracts (each on 100 shares) with a strike price of $25 and an expiration date in four months. If at the end of four months the stock price proves to be less than $25‚ you can exercise the options and sell the shares for $25 each. Problem 1.9. A stock when it is first issued
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CHAPTER 9 Mechanics of Options Markets Practice Questions Problem 9.8. A corporate treasurer is designing a hedging program involving foreign currency options. What are the pros and cons of using (a) the NASDAQ OMX and (b) the over-the-counter market for trading? The NASDAQ OMX offers options with standard strike prices and times to maturity. Options in the over-the-counter market have the advantage that they can be tailored to meet the precise needs of the treasurer. Their disadvantage
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defined generally as foreign exchange transactions conducted by the monetary authorities with the aim of influencing exchange rates. It is the process by which the monetary authorities attempt to influence market conditions and/or the value of the home currency on the foreign exchange market. Intervention usually aims to promote stability by countering disorderly markets‚ or in response to special circumstances. In Japan‚ the Minister of Finance is legally authorized to conduct intervention as a means to
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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
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