“There’s no real difference between options and futures. Both are hedging tools, and both are derivative products. It’s just that with options you have to pay an option premium, whereas futures require no upfront payment except for a ‘good faith’ margin. I can’t understand why anyone would use options.” Do you agree with this statement?
Answer to relevant QuestionsWhat arguments would be given by those who feel that the Black-Scholes model does not apply in pricing interest-rate options? Consider the following interest-rate swap: • The swap starts today, January 1 of year 1 (swap settlement date) • The floating-rate payments are made quarterly based on actual / 360 • The reference rate is 3-month ...How can an interest-rate collar be created? The following appeared on a quote sheet: “Receiver Swaption: An option to receive the fixed leg of a swap (i.e., long receiver is long duration). Payer Swaption: An option to pay the fixed leg of a swap (i.e., long payer ...The following is an excerpt from “MCDX Municipal CDS index on the rise,” Credit Default Swap Market Reporting, July 1, 2010 (http://blog.creditlime.com/2010/07/01/municipal-cds-index-rising/) The 5-year MCDX increased ...
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