in which they are bought and sold in standardized forms of contracts. Many different factors affect the prices of commodities. This includes taxes‚ money supply‚ and inflation. Other factors such as transportation and its costs‚ Politics‚ weather and technology and its changes can have an effect as well. If‚ for instance‚ you were speculating in gold‚ you would buy gold biscuits‚ nuggets if you feel the price would go up in the future and you would wait for some time and sell it when the returns
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Practice Questions Problem 1.1 What is the difference between a long forward position and a short forward position? When a trader enters into a long forward contract‚ she is agreeing to buy the underlying asset for a certain price at a certain time in the future. When a trader enters into a short forward contract‚ she is agreeing to sell the underlying asset for a certain price at a certain time in the future. Problem 1.2. Explain carefully the difference between hedging‚ speculation
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1) An MNC or a multinational corporation has business entities (wiseGEEK‚ 2013) operating in many countries. It has its main headquarter in its home country while having offices‚ factories in other countries (Investopedia‚ 2013). These companies set up branches in other countries to take the relative comparative advantages those countries may offer(International Finance Study Guide‚ 2013) 2) Currency exchange risks occur as the exchange rates fluctuate every second throughout the day. MNCs often
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INTRODUCTION Financial Market A financial market is a broad term describing any marketplace where the buyers and sellers participate in the trade of assets such as equities‚ bonds‚ currencies and derivatives. Financial markets are typically defined by having transparent pricing‚ basic regulations on trading‚ costs and fees‚ and market forces determining the prices of securities that trade. Types of Financial Market Capital Market Trader in instrument with an original maturity of more than
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differentiate the forward price from the value of a forward contract? (2 points) 2. Explain why an FRA can be viewed as an exchange of a floating rate of interest for a fixed rate of interest payments and how you can use FRA in mitigating risks. (4 points) 3. The standard deviation of monthly changes in the spot price of live cattle is 1.2 cents per pound. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 1.4. The correlation between the futures price
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Tiffany & Co. Case Study After Tiffany & Co. made the new retiling agreement with Mitsukoshi Ltd in July 1993‚ Tiffany & Co Japan. Inc started to be responsible to manage the operations of 29 boutiques in Japan. Tiffany will now face both opportunities and risks. Prior to the new agreement‚ the wholesale transactions were dominated entirely in dollars‚ so yen/dollar exchange rate fluctuations were not the reason of Tiffany’s cash flow volatility‚ and Mitsukoshi bore the exchange risk between the
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Value-at-Risk Models for Capital Adequacy Calculations‚” vol. 65 (July 17‚ 1995b)‚ pp. 120–21. . “Schapiro Says CFTC‚ Industry to Craft Customer Protection Proposals‚” vol. 65 (July 3‚ 1995c)‚ pp. 15–16. A. Kuprianov: Derivatives Debacles 37 . “World Futures Regulators Adopt Plan of Action in View of Barings‚” vol. 64 (May 22‚ 1995d)‚ pp. 1017–18. . “CFTC Undertaking Regulatory Review: Schapiro Address[es] Failure of Barings PLC‚” vol. 64 (March 6‚ 1995e)‚ pp. 469–70. . “CFTC Chairman Schapiro Tells Congress
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CHAPTER-1: INTRODUCTION & RESEARCH METHODOLOGY Introduction:- commodity market Commodities futures trading have evolved from the need for ensuring continuous supply of seasonal agricultural crops in Japan‚ merchants stored rice in warehouses for future use. In order to raise cash‚ warehouse holders sold receipts against the stored rice. These were known as “rice tickets” Eventually such rice tickets became accepted as a kind of general commercial currency. Rules came into being‚ to
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MFIN6003 Derivative Securities Dr. Huiyan Qiu End-of-chapter Questions for Practice (with Answers) Following is a list of selected end-of-chapter questions for practice from McDonald’s Derivatives Markets. For students who do not have a copy of the McDonald’s book‚ be aware that a copy of the book is reserved at the main library of the University of Hong Kong for you to borrow for short period of time. Answers provided are for your reference only. It is complied directly from the solution
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Financial Derivatives Various Types and Pricing of Forward Contracts Contents 1. Introduction.............................................................................................................................3 2.1 Futures...................................................................................................................................4 2.2 Options....................................................................................................................
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