Basis risk refers to the risk: A. associated with anticipated price movements in the cash market. B. associated with unanticipated price movements on the underlying asset. C. of default on the futures...
Basis risk refers to the risk:
A. associated with anticipated price movements in the cash market.
B. associated with unanticipated price movements on the underlying asset.
C. of default on the futures contract.
D. from a change in the spread between the price on the commodity or financial security in the physical market and the price of the related futures contract.
Homework Answers
Basis risk is the risk arising out of the difference between the cash market and futures market. This is a risk because futures price may vary differently over time in relation to cash market price. Therefore answer is option d
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Basis risk refers to the risk: A. associated with anticipated price movements in the cash market. B. associated with unanticipated price movements on the underlying asset. C. of default on the futures...
Enterprise risk management The process of enterprise risk management relies on a variety of activities and...
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Profit or Loss from a futures risk management strategy: I. Is the difference between the current...
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1. Which of the following trades implies that ownership has been taken? a. Buying a futures...
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The premium paid on an option contract (either a put or a call) represents the compensation...
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Enterprise risk management The process of enterprise risk management relies on a variety of activities and instruments characterized by specific and often confusing meanings. To ensure that the meaning of these terms are clear in your mind, match the terms relating to the basic terminology and concepts associated with the process of enterprise risk management on the left with the descriptions of the terms on the right. Read all descriptions first and then make the best match between each description...
Profit or Loss from a futures risk management strategy: I. Is the difference between the current price of the futures contract and its future price; II. Is used to offset the profit or loss of the previous market transaction; III. Is highly undesirable because does not allow to hedge the spot price of an underlying asset. Select one: O a. Only I is correct O b. Only Il is correct o c. Only III is correct O d. Only I...
1. Which of the following trades implies that ownership has been taken? a. Buying a futures contract. b. Selling a futures contract. c. Buying a stock. d. Shorting a stock. e. None of the above implies ownership. The following transactions are the only ones made during the first 4 days a futures contract trades. Answer question 2 based on this table. DAY TRANSACTION S O 1 A Long 30, B Short 30 2 A Long 55, C Short 55 3...
All of the statements below are not false, except: 1. Changes in interest rates represent a risk for both borrowers and investors because of diminishing investment prospects and increased cost of borrowing; II. Failure to pay accounts receivable on time by customers may have a significant negative impact on the capital base of a company; III. Companies involved in cross-border trades are subject to FX risks: IV. It is essential for banks to assess the creditworthiness of customers to mitigate...
Fair Value Measurements The fair values of our financial assets and liabilities as of December 26, 2015 and December 27, 2014 are categorized as follows: 2015 2014 Assets(a) Liabilities(a) Assets(a) Liabilities(a) Available-for-sale securities: Equity securities (b) $ 127 $ - $ 124 $ Debt securities (c) 7,231 - 3,167 $ 7,358 $ - $ 3,291 $ Short-term investments (d) $ 193 $ - $ 197 $ - Prepaid forward contracts (e) $ 27 $ - $ 26 $ Deferred compensation...
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