Questions and exercises on derivatives with solutions, Esercizi di Finanza

Scarica Questions and exercises on derivatives with solutions e più Esercizi in PDF di Finanza solo su Docsity! In the field of corporate hedging, which variable(s) must be monitored by a company? 1. only the volatility of the price of a supply, no matter what happens to other parameters 2. only lthe volatility in the price of a supply and the exposition of the company to that supply 3. only the incidence of the price of a supply on the final prices of the goods produced by the company 4. the volatiliy of the price of a supply, the exposition to that supply and the incidence of that supply on the final costs of the goods produced by the company Which sentence applies to stock futures? 1. terms of contracts can be agreed by the two parties out of the exchange 2. their price is autonomous, without any connection with the price of the underlying stock 3. they are standardized contracts 4. their prices is strictly related to the volatility of the stock market Commodity futures’ prices 1. depend on interest rates, residual life, and dynamics between supply and demand 2. follow the same rules of stock futures 3. can be equal to, over of below the spot price 4. are always higher than spot prices, because they capitalize storage costs, always positive 5. only 1 and 4 are correct 6. only 1 and 3 are correct Backwardation applies to 1. currency futures 2. stock futures when there are dividends 3. commodity futures, amplifying the positive difference between futures and spot price 4. commodity futures, when dynamics between supply and demand due to contingent needs push spot prices over futures prices Hedging with futures 1. rewards always 2. allows to preset the price for purchasing or selling a good, keeping benefits in case of favourable price moements 3. rewards only when the volatility of the underlying commodity stabilizes 4. can be useful above all when a company needs to ensure the availability of a good, rather than to protect itself from price risks Which sentence applies to an oil producer that sells a futures to hedge the price risk of oil? 1. the company is covered from the fall of the oil’s price 2. the company is covered from the growth in the oil’s price 3. the company will have the right to buy oil at maturity, at a specific price 4. the company will have the right to sell oil at maturity, at a specific price Which sentence applies to currency futures? 1. terms of contracts can be agreed by the two parties out of the exchange 2. their price is autonomous, without any connection with the price of the underlying exchange rate 3. they are standardized contracts 4. their prices is strictly related to the volatility of the bond market Stock futures’ prices are 1. a crescent function of interest rates and residual life 2. a crescent function of interest rates and a decreasing function of residual life 3. a decrescent function of the spot price 4. a crescent function of volatility of the underlying The leverage of futures contract 1. is given by the use of capital much lower than the value of the underlying asset 2. it’s a source of risk that cannot be managed 3. allows to gain much with small capitals and low risks 4. all previous answers are correct 5. all previous answers are wrong Backwardation shows up in currency futures, when interest rates in one of the two countries are much lower than those of the other 1. true 2. false Hedging with futures 1. allows to preset the price of a good to buy or sell at some date in the future 2. rewards only when the intial volatility is very low 3. rewards only when prices are stable 4. provides benefits no matter the future direction of the price A long call option and a short put option 1. do not have the same payoff at maturity 2. they both have a maximum potential loss 3. they both have a prefixed return 4. all previous answers are correct 5. all previous answers are wrong Exercise Consider a company that extracts and sells gold in South Africa. The internal management of the company (supplies, human work, and the like) is in South African rands. The gold extracted is sold on the international market, in US dollars. How many and which sources of risk do you see here? Draw the lines of risk (one for each source of risk) and make an hypothesis of hedging strategies with options. Solution The first risk is the price of gold: if it increases it is an advantage, and viceversa. The risk line is then the following: To neutralize the risk of a fall in price the company needs to buy a put on gold.