Financial Markets and Products
Just finished this reading and there are some very complex formulas in here. Do we need to know how to calculate the value of the various exotic option types? I know that the learning objectives state “describe” more than calculate, but there are tons of complex formulas all over the chapter that make me worry…
Need to know, as I didn’t find any content in FRM related to Financial reporting or Financial statement analysis etc. so if a person working in Risk Management department of bank then he is suppose to be well versed in financial statement analysis in order to get in depth understanding of financial numbers of a company to whom the credit facilities to be approved, so how would FRM tackle with this. Thanks
At the inception of a six-month forward contract on a stock index, the value of the index was $1,150, the interest rate was 4.4
percent, and the continuous dividend was 1.8 percent. Three months later, the value of the index is $1,075. Which of the
following statements is TRUE? The value of the:
short position is $47.56.
long position is $47.56.
long position is $82.41.
long position is -$82.41.
Colin Cooper is in possession of a large quantity of wheat and expects prices to decline. Which of the following positions is most
appropriate for Cooper?
Short the basis.
Long the basis.
Answer given is long the basis
but i feel this is wrong as basis = spot - future and price to decline means spot is falling hence basis is reduced hence this will lead to loss for long basis i.e. short hedge.
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A decline in the real USDJPY exchange rate most likely:
Increases a U.S. investor’s purchasing power relative to a Japanese investor’s.
Increases a Japanese investor’s purchasing power relative to a U.S. investor’s.
Increases the JPY‐denominated value of a Japanese investor’s investments in the United States.
You Answered Correctly!
You need to verify the cash flows and end‐of‐day valuation of a 3‐year pay fixed swap that is on d your esk. The end‐of‐day P&L doesn’t seem quite right and you are taking this swap as a sample to see if you have bad data or a bad model.
The swap you have on is a 500 million pay fixed 1.5% 3‐year USD swap that receives annual LIBOR.
I don’t understand why they subtract K from the forward price in the calculation. Couldn’t you just discount 1050 back 9 months to get to today’s price?
The answer is B as given in the practice book. However, after calculation of the net cost for short position, I find that bond C should be the cheapest to deliver bond. Can anyone help me about this question?
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