CHAPTER 7 FUTURES AND OPTIONS ON FOREIGN EXCHANGE SUGGESTED ANSWERS AND SOLUTIONS TO END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Explain the basic differences between the operation of a currency forward market and a futures market. Answer: The forward market is an OTC market where the forward contract for purchase or sale of foreign currency is tailor-made between the client and its international bank. No money changes hands until the maturity date of the contract when delivery
Words: 3766 - Pages: 16
KINH DO CORPORATION (KDC) May 12, 2015 COMPANY UPDATE BRIEFS KDC and Sewong to establish a manufacturing plant to increase capacity. On May 12, Kinh Do Corporation (KDC-HSX) and Saigon Vewong officially signed a contract to establish a manufacturing plant in Bac Ninh industrial zone with an initial investment of USD30 million. KDC will contribute 49 percent of the joint venture, with the remainder held by the Taiwanese company, which is a well-known instant noodles producer. In November
Words: 1391 - Pages: 6
Chapter 11: 4, 7, 8, 10, 11, 12, 14, 15, 18, 20, 21, 22, 23, 24, 26, 27 Chapter Eleven Credit Risk: Individual Loan Risk Chapter Outline Introduction Credit Quality Problems Types of Loans • Commercial and Industrial Loans • Real Estate Loans • Individual (Consumer) Loans • Other Loans Calculating the Return on a Loan • The Contractually Promised Return on a Loan • The Expected Return on a Loan Retail versus Wholesale Credit Decisions
Words: 7298 - Pages: 30
Christof Feichtinger Cafe de Guatemala Hedging Price Fluctuations of the Coffee Markets with the Help of Future Contracts Table of Contents 1. The Business Case - A Short Overview 1 2. About futures markets 1 2.1. Price risk 2 2.2. Volatility 2 2.3. Leverage 2 3. Organization of futures market 2 4. The New York Arabica Contract 2 4.1. Trading Hours, Quotations, Price Fluctuation Limits 2 4.2. Deliveries, Tenderable Growths and Differentials 2 4.3. Integrating Futures and Cash Markets:
Words: 2852 - Pages: 12
robust analysis. Firstly, commodities are a highly demanded investment which is traded using options and futures contract.. Moreover, they are also an element of diversification that investors can lower their vulnerability to market volatility. Despite its high volatility in its prices, it managed to gain a higher return as compared to stocks and bonds. As commodities have a low correlation with bonds and stocks, it is able to reduce unsystematic risk through diversification. Its high correlation with
Words: 6449 - Pages: 26
which is consistent with market observable forward prices and volatilities. The model is a special case of the multi-factor model developed in Clewlow and Strickland [1999b] and leads to analytical pricing formula for standard options, caps, floors, collars and swaptions. We also show how American style and exotic energy derivatives can be priced using trinomial trees, which are constructed to be consistent with the forward curve and volatility structure. We demonstrate the application of the trinomial
Words: 8008 - Pages: 33
Question 1 What was the motivation to issue Nikkei-linked Eurobonds? The motivation for the European bank issuers of the Eurobonds, wasthe possibility to get U.S. dollar finance for a lower interest rate. Toachieve this, the issuer could sell the embedded put to Goldman Sachs. The profits from the put offset the difference between the 7%coupon they paid on the bonds and the desired LIBOR floating rate. The payment from the put covered the cost paid to the swapcounterparty for hedging the exposure
Words: 1719 - Pages: 7
PART 1 Introduction Objective – The objective is to protect the capital value of the stock positions, while having a short term cautiously bullish view on the stock but also concerned about the fall in the price. Hence a combination of collar strategy and protective put was adopted, as they are more appropriate for a short term period. Only one stock was shorted. Also we seek a target return of 10% annualized. Benefits & Risks - Our profit potential is not limited, so if the share price rise
Words: 1609 - Pages: 7
Paper Student ID: 810110116 This case analyzes the business transaction between DC Inc (US seller) and CR Limited (UK purchaser) for 100,000 pounds. DC Inc has determined that its minimum acceptable sale price was 170,000 which therefore implied that its budget exchange rate was $1.70/pound. The transaction risk here is that the exchange rate could fall below $1.70 resulting in a loss to DC. Inc. This paper will analyze four options available to DC Inc to manage its currency exposure:
Words: 1646 - Pages: 7
JAPANESE CANDLESTICK CHARTING TECHNIQUES ~-Y?~L&B~E!% L ?ABWt "Candles Exhaust Themselves to Give Light to Men" JAPANESE CANDLESTICK CHARTING TECHNIQUES A Contemporary Guide to the Ancient Investment Techniques of the Far East STEVE NISON NEW YORK INSTITUTE OF FINANCE NewYork London Toronto Sydney Tokyo Singapore Library of Congress Cataloging-in-Publication Data Nison, Steve. Japanese candlestick charting techniques : a contemporary guide to the ancient investment technique
Words: 32110 - Pages: 129
