Question: 1. Explain the basic differences between the operation of a currency forward market and a futures market. Bring an example 2. What is the major

1. Explain the basic differences between the operation of a currency forward market and a futures market. Bring an example

2. What is the major difference in the obligation of one with a long position in a future (or forward) contract in comparison to an options contract?

3. Discuss the advantages and disadvantages of hedging foreign currency risk and interest rate risk using forward, future, swap and option contracts. Provide one example for each.

4. Discuss advantage and disadvantage of using swap default contract (SDC) and credit spread options and provide an example for each one of them.

5. Discuss the basic motivations for a counterparty to enter into a currency swap. 6. How does the theory of comparative advantage relate to the currency swap market?

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