independent of any monetary system. Currency risk exposure is the dollar amount that is at risk if exchange rates move in an unfavorable direction. A company has currency exposure when the currencies for its expenditures and revenues are not the same. Future payments or distributions payable in foreign currency carries the risk that the foreign currency will depreciate in value before the foreign currency payment is received and converted into US dollars. Although there is a chance for profit‚ most
Premium United States dollar Foreign exchange market Exchange rate
the Canadian dollar return after conversion to U.S. dollars to 8.17%. (Exhibit 3.2). Chapter 15 4. Discuss some disadvantages of technical analysis. The disadvantages of technical analysis are: (1) past price patterns may not be repeated in the future; (2) the intense competition of those using the trading rules will render the technique useless; (3) the trading rules require a great deal of subjective judgment; and (4) the values that signal action are constantly changing. 13. Explain the reasoning
Premium Option Futures contract Short
“A STUDY OF PROSPECTS OF AGRICULTURAL COMMODITY FUTURES IN INDIA – A CASE OF TURMERIC” Prof Gurbandini Kaur‚ All India Management Association (AIMA)‚ Email: gkaur@aima-ind.org Abstract A commodity exchange is defined as a market where buyers and sellers trade commodity linked contracts on the basis of terms and conditions laid down by Commodity Exchange (UNCTAD‚ 2007). At present‚ there are 23 exchanges operating in India and carrying out futures trading activities in as many as 146 commodity items
Premium Futures contract
program? Specifically‚ what exposures should be actively managed? How much of these exposures should be covered‚ and for how long? 4) As instruments for risk management‚ what are the chief differences of foreign-exchange options and forward or future contracts? What are the advantages and disadvantages of each? Which‚ if either‚ of these types of instruments would be most appropriate for Tiffany to use if it chose ot manage its exchange-rate risk? 5) How should Tiffany organize itself to
Premium United States dollar Exchange rate Foreign exchange market
into surplus forward contracts‚ they will lose money. On the other hand‚ if their sales volume came in higher than expected‚ they need more currency to cover. But the currency rate moved in the money‚ so they have to buy at a higher rate than the rate they used when they priced the catalog. Either‚ it could hurt their revenues. (aka Bottom line risk and sales volume risk) The alternative option is to bill customers in euros by including a currency adjustment clause in its contracts. Currency exchange
Premium United States dollar Currency Futures contract
Initially‚ they were used to reduce exposure to changes in foreign exchange rates‚ interest rates‚ or stock indexes. For example‚ if an American company expects payment for a shipment of goods in British Pound Sterling‚ it may enter into a derivative contract with another party to reduce the risk that the exchange rate with the U.S. Dollar will be more unfavorable at the time the bill is due and paid. Under the derivative instrument‚ the other party is obligated to pay
Premium Futures contract Derivative
CHAPTER 3 Hedging Strategies Using Futures Practice Questions Problem 3.8. In the Chicago Board of Trade’s corn futures contract‚ the following delivery months are available: March‚ May‚ July‚ September‚ and December. State the contract that should be used for hedging when the expiration of the hedge is in a) June b) July c) January A good rule of thumb is to choose a futures contract that has a delivery month as close as possible to‚ but later than‚ the month containing the expiration
Premium Futures contract
Market Index 3. Futures and Options 4. Trading‚ Clearing and Settlement 5. Regulatory Framework 6. Annexure I – Sample Questions 7. Annexure II – Options – Arithmetical Problems 8. Annexure III – Margins – Arithmetical Problems 9. Annexure IV – Futures – Arithmetical Problems 10. Annexure V – Answers to Sample Questions 11. Annexure VI – Answers to Options – Arithmetical Problems 12. Annexure VI I– Answers to Margins – Arithmetical Problems 13. Annexure VII – Answers to Futures – Arithmetical Problems
Premium Futures contract
buying 100 shares and buying 2‚000 call options (20 contracts). Both strategies involve an investment of $9‚400. What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable? Q2: It is now October 2007. A company anticipates that it will purchase 1 million pounds of copper in each of February 2008‚ August 2008. February 2009‚ and August 2009. The company has decided to use the futures contracts traded in the COMEX division of the New York Mercantile
Premium Futures contract Short
CHAPTER 1: INTRODUCTION END-OF-CHAPTER QUESTIONS AND PROBLEMS 1. (Market Efficiency and Theoretical Fair Value) An efficient market is one in which prices reflect the true economic values of the assets trading therein. In efficient markets‚ no one can earn returns that are more than commensurate with the level of risk. Efficient markets are characterized by low transaction costs and by the rapid rate at which new information is incorporated into prices. 2. (Arbitrage and the Law of One Price)
Premium Futures contract Derivative