Question: When a hedger expects a price fall in the prices of the underlying asset? 1.a long hedge can be used to hedge the prices of

When a hedger expects a price fall in the prices of the underlying asset?

1.a long hedge can be used to hedge the prices of underlying asset

2.a short hedge can be used to hedge the prices of underlying asset

3.all of the above

4.non of the above

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

The isolation of a short polypeptide yields 230 kg of butanol extract containing 0.081 wt% peptide. We want to strip this extract with initially peptide-free saline solution at pH 9.0 to yield a...

Q:

When a hedger expects a price rise in the prices of the underlying asset 1. A long hedge can be used to hedge the prices of underlying asset. 2. A short hedge can be used to hedge the prices of...

Q:

In which of the following scenarios can the daily settlement of futures contracts ( and the resulting posting of variation margin ) lead to a cash flow problem for the hedger ( this is what famously...

Q:

In which of the following scenarios can the daily settlement of futures contracts (and the resulting posting of variation margin) lead to a cash flow problem for the hedger (this is what famously...

Q:

Assume the ASX 200 index is 4000 and that index options are $25 per index point. An investor decides to buy a put bear spread with strikes of 4000 and 3700 and premiums of 220 points and 100 points...

Q:

1.If you are comparing a corporate bond yield of 12% with a Treasury bond yield of 6%, then the default risk premium is A. 6% B. 24% C. 18% D. 12% 2. The term structure of interest rates explains why...

Q:

I would like it if you could explain why the answer is right, and what the key words are that make the answer right. Also any additional information you think that is important in answering this...

Q:

1. Suppose you buy an asset at $50 and sell a futures contract at $53. What is your profit at expiration if both the asset price and futures price are $49? (Ignore carrying costs) a. -$1 b. -$4 c. $3...

Q:

Answer the following MCQs by choosing the correct answer and fill it up in the answer table provided at the end of this section. Each correct answer will be awarded 2 marks. 1.A company enters into a...

Q:

1. Explain why MGRM wanted to offer a price guarantee on purchase contracts for its customers? 2. Describe the position that MGRM had. Why did it want to hedge its position? 3. Describe the basic...

Q:

Evaluate the potential gains and losses for forwards,future,call options,put options and swaps. Outline and describe the different risks that each type of derivative contract faces. Describe...

Q:

Kartman Corporation is evaluating four real estate investments. Management plans to buy the properties today and sell them three years from today. The annual discount rate for these investments is...

Q:

Barrick Gold Corporation purchased mineral rights for a gold mine in Peru on October 1, 2014, by paying cash of $5,000,000 and incurring a long-term note payable for the $30,000,000 balance. Barrick...

Q:

The current yield curve for default - free zero - coupon bonds is as follows: Maturity ( Years ) YTM ( % ) 1 4 . 5 % 2 5 . 5 3 6 . 5

Q:

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...