Types Of Derivatives And Derivative Market

Types Of Derivatives And Derivative Market

Types Of Derivatives And Derivative Market


Discuss About The Types Of Derivatives And Derivative Market?



Withdrawable margin account amount is an amount that exceeds the initial margin. In this case, an increase in $1 in the future price will lead to a gain of $1000. Therefore, for an increase of $2, the gain will be $2,000 which can be withdrawn. The current future price is $60 implying that the future price will be (60+2) = $62.

Thus, the correct answer is B

and  [1]

Where, U is the present value of the total storage costs, T is the time, the spot price, r is the risk-free rate with continuous compounding and  the future price today.

Approximately, the correct answer is C

Forward rate=

Long Term LIBOR=4%

Long term period=1 year

Short term LIBOR=3.75%

Short term period=9 months=

Contract period=3months=

Substituting the values in the above equation, Forward rate=

The correct answer is C

A Future contract refers to a standardized contract mainly traded in exchange. Futures don’t carry any credit risk as the clearinghouse serves as the third party(counter-party) to the two parties involved in the contract. Moreover, the credit exposure in the futures contract is reduced by marked-to-market daily criteria.

On the other hand, a forward contract is an agreement between two parties where settlement takes place over-the-counter.