Log in
Finance
5
answers
0
watching
82
views

What are the major advantages of futures contracts compared to forwards? Why are futures contracts marked to market every day? Why are they standardized? What are the disadvantages of futures contracts?

Watch
5
answers
0
watching
82
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Already have an account? Log in
Share
Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019
Already have an account? Log in
Share

Related questions

6. Discuss the advantages and disadvantages of using futures options to hedge as compared to futures contracts. Explain in detail. (commodity price risk management)

1.One distinction between futures and forward contracts is

Forward contracts can be used to hedge and speculate, while futures contracts are only used for hedging purposes.

Forward contracts are highly standardized.

Futures contracts mark to market.

Futures contracts highly specialized.

2.

If the spot price for the pound in terms of dollars decreases over a given amount of time, the futures price for pounds (in terms of USD) would likely decrease over that same time period.

True

False

Suppose that a manufacturer has an ongoing need for silver as a raw material in the production process, and is concerned about the risk of the price of silver going up. Two hedging choices being considered are futures contracts and options.

First, explain whether this firm should

(i) buy or sell futures contracts

(ii) use call or put options and whether the firm should buy or sell them.

Second, discuss the advantages and disadvantages of hedging using options as compared to futures contracts. (20 points)

Weekly leaderboard

Home
Homework Help 3,900,000
Finance 370,000
Start filling in the gaps now
Log in