Question
When the foreign exchange (FX) futures market is used for price discovery: One will generally not see steadily appreciating or depreciating pricing patterns, with price
When the foreign exchange (FX) futures market is used for price discovery:
One will generally not see steadily appreciating or depreciating pricing patterns, with price discovery occurring on contract expiration dates in the FX market. | ||
FX forward prices are subjective predictors of future spot exchange rates. | ||
The pattern of the prices of these contracts provides information as to the markets current belief about the relative future value of one currency versus another at the scheduled expiration dates of the contracts. | ||
All of the above. |
An interest-only single currency interest rate swap:
Is also known as a plain vanilla swap. | ||
Is also known as an interest rate swap. | ||
Both a. and b. | ||
None of the above. |
In the case of long positions in futures (or forward) contracts and options we find that:
If the long of the futures (or forward) holds the contract to the delivery date, he pays the effective contractual futures (or forward) price, regardless of whether it is an advantageous price in comparison to the spot price at the delivery date. | ||
Because the long option owner does not have to exercise the option if it is to his disadvantage, the option price, or premium paid at inception can be claimed back from the seller of the option, if not exercised. | ||
If the long of the futures (or forward) holds the contract to the delivery date, he is not enforced to pay and take delivery if the spot price is more favourable than the agreed future (forward) price. | ||
The long of the futures (forward) pays a premium, similar to an option price at inception of the future (forward) contract, but, if the contract is held to delivery date, he deducts it from the future (forward) price payable. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started