# Types Of Derivatives And Derivative Market

Types Of Derivatives And Derivative Market

## Question:

Discuss About The Types Of Derivatives And Derivative Market?

### Introducation

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 Therefore, for an increase of \$2, the gain will be \$2,000 which can be withdrawn.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.