Interested to Buy Any Domain ? << Click Here >> for more details...
Concept of forward/futures, call/put option, arbitrage,
hedging, speculation, collateral management?
- 2 Answers
- 8816 Views
- Mellon, I also Faced
- E-Mail Answers
Answer Posted / kunal ingale
1. Forward:-
In finance, a forward contract or simply a forward is a non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed upon today.[1] This is in contrast to a spot contract, which is an agreement to buy or sell an asset today.
2. Futures:-
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today (the futures price or the strike price) with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange. The party agreeing to buy the underlying asset in the future, the "buyer" of the contract, is said to be "long", and the party agreeing to sell the asset in the future, the "seller" of the contract, is said to be "short".
3. Call/put option:-
Broadly speaking, options can be classified as ‘call’ options and ‘put’ options. When you buy a ‘call’ option, on a stock, you acquire a right to buy the stock. And when you buy a ‘put’ option, you acquire a right to sell the stock. You can also sell a ‘call’ option, in which, you will acquire an obligation to deliver the stock.
4. Arbitrage:-
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost.
5. Hedging:-
Hedging means reducing or controlling risk. This is done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks associated with price changes
Hedging is a two-step process. A gain or loss in the cash position due to changes in price levels will be countered by changes in the value of a futures position.
6. Speculation:-
Speculation is a financial action that does not promise safety of capital investment along with the return on the principal sum.[1] A person or entity that engages in speculation is known as a Speculator. Speculation typically involves the lending of money for the purchase of assets, equity or debt but in a manner that has not been given thorough analysis or is deemed to have low margin of safety or a significant risk of the loss of the principal investment.
7. Collateral management:-
Borrowing funds often requires the designation of collateral on the part of the recipient of the loan.
Collateral is legally watertight, valuable liquid property[3] that is pledged by the recipient as security on the value of the loan.
The main reason of taking collateral is credit risk reduction, especially during the time of the debt defaults, the currency crisis and the failure of major hedge funds. But there are many other motivations why parties take collateral from each other.
| Is This Answer Correct ? | 2 Yes | 0 No |
Post New Answer View All Answers
We have two mandatory qualifiers nature of accounts and balancing segment, which will balance the debit and credit and recognize the nature of accounts, my question is what other qualifiers do. Like management. Thank you.
When is proposed divided a current Liability and when is it non-current liability? Why is it in the list of Current Capital Accounts?
what is operational risk and market risk in basel 2 norms.
Can u please give me example of bonds? is National savings certificate a Bond?
What is Spin-off & spilts
what is the main difference between nse & bse operations
I have complited my ERP course in FICO module. Now I want to work in ERP package. Please suggest me how I will apply for the organisation works in ERP environment.
Explain valuation methods of Normal and Abnormal loss
WHEN IN ADJUST. GIVEN THAT THERE IS VALUE OF RS...., OBSOLESCENCE STOCK INCLUDED IN CLOSING STOCK RS.......,WHAT IS THE PROPER WAY TO SHOW IN INCOME STATEMENT AND POSITION STATEMENT.
How Can Pass Credit Limit Entry If We Take Limit Of BANK I Maintain Of Account In Tally.ERP9 Than We Create Bank Ledger of Which Under
how history is helpful for banking?
what is Derivative Documentation,Derivative Settlements,Derivative confirmation?
how to prepare the balance sheet of private ltd. company & what roll should be play by Income tax, compnay law & accounting standard in India & world.
how many types of financial teribuanal? what is that?
is advance against FD or RD is treated as NPA .if EMI is not in scheduled . or classification of npa as per day is is made from sanction date or last payment date of repayment . please suggest me
