Question: Question 7 - Total 7 marks a) It is argued that forward contracts are based on a contractual arrangement with little or no flexibility and

Question 7 - Total 7 marks a) It is argued that

Question 7 - Total 7 marks a) It is argued that forward contracts are based on a contractual arrangement with little or no flexibility and as such is not regarded as liquid. There is usually a clear "winner" and "loser". Whereas futures contracts are regarded as a commitment to exchange. Critically discuss. (3.5 marks) b) Hedging risk management strategies are used as a mechanism to offset possible future losses. However, even though is has financial benefits, it may create possible agency problems? Critically discuss. (3.5 marks)

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