Why are options on bond futures more actively traded than options on bonds?

Question:

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

See More Books

Question Posted: Feb 12, 2018 12:18 PM

See More Questions

Why are options on interest rate futures contracts preferred to options on cash instruments in hedging interest rate risk?
June Klein, CFA, manages a $100 million (market value) U.S. government bond portfolio for an institution. She anticipates a small parallel shift in the yield curve and wants to fully hedge the...
A member of an investment committee interested in learning more about fixed-income investment procedures recalls that a fixed-income manager recently stated that derivative instruments could be used...
An assistant treasurer is currently reevaluating their firm's banking relationship. The firm's current lender charges an effective borrowing cost of 4.25 percent. A competing lender provides the...
List some physical location markets and some computer/telephone networks. MINI CASE Assume that you recently graduated with a degree in finance and have just reported to work as an investment advisor...
Duke Manufacturing produces both baseballs and cricket balls on a weekly basis. The resources needed to produce baseballs and cricket balls are leather, cutting, and dyeing time, as well as sewing...
2-2. Mencione ejemplos del nivel funcional de una organizacin .
True or False: If they could, the customers of an ordinary (non-price-discriminating, non-admission-charging) monopolist would get together and bribe the monopolist to charge lower prices. Justify...
QUESTION 10 Which of the following parties is/are covered by the definition of a related party in AASB 124? O Independent directors Chief executive officer O Son-in-law of an executive director O All...
The following boxplot shows the poverty rates (the proportion of the population below the governments official poverty level) for the 50 states and the District of Columbia. The regions are the West...
Explain the difference between a call option on yen and a call option on yen futures.
"A futures price is like a stock paying a dividend yield." What is the dividend yield?
How would you use the binomial tree approach to value an American option on a stock index when the dividend yield on the index is a function of time?
Two roommates (Jen and Kate) can choose whether to clean their apartment (C) or leave it dirty (D). Jen's cost of cleaning is c, but Kate doesn't mind cleaning and has no cost. [Recall that their...
Designation Mass per Depth Width Thickness metre of of section section of of web flange Root Depth radius between Ratios for local buckling Second moment of area Radius of gyration fillets | i Flange...
Discuss the attributes that make an effective leader. What tenets should a leader practice? How does leadership directly impact effective public management? In your own experience, what has led you...
Given the following examples identify whether it describes a positive externality, negative externality, or neither. Example 1: Johanna is graduating from college this weekend. Like her, individuals...
32) Suppose Joaquin grows at an average rate of 0.5in/year for 3 years, then 1.25 inches/year for 4 years, then 0.75 inches/year for 4 years, then 0.4in/year for 5 years. In that time span, how much...
In Problems 7 50, follow Steps 1 through 7 shown below to graph each function. Steps for Graphing a Rational Function R STEP 1: Factor the numerator and denominator of R. Find the domain of the...
Comptech Ltd is a manufacturer of optical equipment. In September 2019, Ed Thompson the Chief Research Officer, attended a conference in Switzerland that focused on optical developments for the 21st...
Explain why there is an arbitrage opportunity if the implied Black (flat) volatility for a cap is different from that for a floor. Do the broker quotes in Table 21.1 present an arbitrage opportunity?
A bank uses Blacks model to price European bond options. Suppose that an implied price volatility for a 5-year option on a bond maturing in 10 years is used to price a 9-year option on the bond....
A bank uses Blacks model to price European bond options. Suppose that an implied price volatility for a 5-year option on a bond maturing in 10 years is used to price a 9-year option on the bond....
Berbice Inc. has a new project, and you were recruitment to perform their sensitivity analysis based on the estimates of done by their engineering department (there are no taxes): Pessimistic Most...
#3) Seven years ago, Crane Corporation issued 20-year bonds that had a $1,000 face value, paid interest annually, and had a coupon rate of 8 percent. If the market rate of interest is 4.0 percent...
I have a portfolio of two stocks. The weights are 60% and 40% respectively, the volatilities are both 20%, while the correlation of returns is 100%. The volatility of my portfolio is A. 4% B. 14.4%...

Why are options on bond futures more actively traded than options on bonds?

Question:

Step by Step Answer:

The main reason is that a bond futures contract i...View the full answer

Options Futures and Other Derivatives

Students also viewed these Corporate Finance questions