Explain how a company can use the futures market to hedge against rising rawmaterials prices.

Q: What is the Futures and Options Market? What are the features? Provide information about the Futures…

A: Futures contract is a legal contract which is standardized in nature. The contract is used by market…

Q: Describe the basis of Futures contracts and discuss the potential risks and rewards.

A: An agreement where there are two parties, say one is a buyer and another one is a seller decides to…

Q: Are futures prices always greater than the current spot price? Explain

A: The contango hypothesis battles that the purchasers of the items are the natural hedgers since they…

Q: e in fin

A: Long hedge in financial futures : A long hedge can be understood as the futures position taken for…

Q: What is the process that makes sure the market price of an underlying asset equals the price of a…

A: Futures contract is a derivative instrument in which the price of the underlying asset in fixed for…

Q: Evaluate the criticism that futures markets siphon off capital from more productive uses.

A: Future contracts are derivative instruments which are used for hedging the exposure of increase or…

Q: Q19: Using Futures contract to transfer price risk is called     diversifying.     hedging…

A: Derivative contract can be used for hedging, speculation and arbitrage

Q: Explain how a company can use Treasury bond futures to hedgeagainst rising interest rates.

A: Interest rate risk is the risk arising due to a rise in the interest rates. This interest rate risk…

Q: What is a futures contract, and how are futuresused to manage risk? What are you protectingagainst…

A: Answer: Future contracts are an agreement to buy or sell anything on a specified future date. Two…

Q: Identify the fundamental distinction between a futures contract and an option contract, and briefly…

A: Fundamental difference between a futures and option contract lies in following parameters:…

Q: What is a normal market for futures? What does an inverted futures curve indicate?

A: The future refers to the legal agreement between the buyer and the seller to exchange underlying…

Q: illustrate the use of derivatives to hedge portfolio risk with an example?

A: A derivative is depicted as an investment procedure outlined to assist the financial specialist to…

Q: Show graphically and explain the profits and losses of buying futures relative to buying call…

A: If an investor buys Future contract or Call Option Suppose the investor buys a call option at…

Q: Carefully compare and discuss the concept of margins in forwards/futures markets and options…

A: Margin is the amount that is deposited as a security in the derivative contracts.

Q: Suppose a company knows the quantity of a commodity that it willproduce. Describe how it might hedge…

A: Introduction: Hedging is one form of investment in the concept of risk management system. It is an…

Q: Spot market Futures market Over the counter market Forwards markets

A: Commodity market are very important for determining the prices of commodities.

Q: a) We can eliminate market exposure from our portfolio by shorting S&P500 index. Why bother with…

A: If the elimination of market exposure from our portfolio can be done by shorting the S&P500…

Q: Describe forwards, futures, and swaps.  What are the features of each type of derivative and how are…

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: A hedger buys a futures contract, taking a long position in the wheat futures market. What are the…

A: Hedger: A hedger is a person who takes an offset position to the investment to protect from the…

Q: Describe how commodity futures markets can beused to reduce input price risk.

A: The futures are the types of financial derivatives in which two parties entered into a contract to…

Q: Explain the Use of Derivatives to Hedge Portfolio Risk?

A: The contract whose value derives from the fluctuation of values of the underlying assets is called…

Q: How do forwards, futures, and swaps hedge risk?

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: Explain why a futures contract can be used for either hedging or speculation.

A: Hedging and speculation are the strategies which are used by investors while trading. Hedging is…

Q: w can the company use currency futures contracts to hedge against exchange rate risk?

A: A future contract is an agreement to buy or sell the underlying asset on a specified future date and…

Q: Explain how the futures markets can be used to reduce interest rate and input price risk.

A: A contract in which a seller & a buyer has an obligation to sell or buy an asset for a…

Q: The ability to buy on margin is one advantage of futures. Another is the ease with which one can…

A: The question is based on the concept of future derivative contract, which is define as an exchange…

Q: What’s the difference between spot markets and futures markets?

A: Introduction: Spot market can be defined as a over the counter market which involves trading of…

Q: 2.) In your own words, explain why the index futures is an important class of derivative securities.…

A: Indexed futures are basically the futures listed on the stock exchanges. Futures are derivatives…