Question: a. Describe the key difference between a futures contract and an option on a futures contract, as well as how futures and options affect portfolio

a. Describe the key difference between a futures contract and an

a. Describe the key difference between a futures contract and an option on a futures contract, as well as how futures and options affect portfolio risk differently. ( 9 marks) b. Consider a two-binomial model in which a stock currently trades at a price of P65. The stock price can go up 20 percent or down 17 percent each period. The risk-free rate is 5 percent. Calculate the price of a call option expiring in two periods with an exercise price of P60

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