Business & Finance homework help
Business & Finance homework help. 1500 words references in Harvard style :.
Question :Discuss how the DIFFERENT types of DERIVATIVE operate and function, and how they can be used to hedge various (market) types of risk.
Students would be expected to discuss :
- What is derivative ?and what is its role and function ?
- Derivative strategy:
- Speculation :taking risk
- Arbitrage:take money without risk, find efficiency in the market
- Hedging: is not about gains , it minimize losses we focusing on this !
- The different types of derivatives to be explained in details:
- Futures:
- Options
- Swaps
- How do they work?
- Pro and cons of using future/option/swap to hedge risk
- Their risk characteristics?
- Using future/option/swap contract to hedge interest rate and risk
- Using future/option/swap contract to hedge exchange rate risk
- Issues in interest rate and exchange risk management
- Examples of their use in hedging for Farmers, Producers, Companies for interest rates and exchange rate , weather etc etc.etc.etc .
- And any other relevant parts that show the understanding of the topic and the question. Answering the question in an essay type by covering everything related to the topic of derivatives and answering the main question :
- Discuss how the DIFFERENT types of DERIVATIVE operate and function, and how they can be used to hedge various (market) types of risk.