Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1. The derivatives market is complex because derivative buying and selling includes many things like financial contracts, including debt and structured debts and deposits, swaps, other obligations, futures, options, floors, caps, and forwards, and various combinations of these. Reporting may be hard to understand because derivatives are often forward looking and there can be many parts to the statement. They also have no real value themselves.

To improve the methods for valuing derivatives so that the reporting becomes more transparent. make the value of these available as soon as they change on financial websites open to the public.
problem: Don't we have useful models for valuing derivatives?

2. Since options have no value, there is no way one can truly figure out his Alpha or Beta number for risk. The standard deviation model needs to be modified to allow for derivatives (based on type, contract length and how purchased). This could help find out a more correct estimate of portfolio risk.

One of the circumstances is based on structured debt (bonds) during times of interest rates rising will likely lose value, so this is risk. Put based in an account of a young investor with not too much equity before a market/stock(s) rally if the derivative is covered or uncovered. That will decrease the risk.

problem: Isn't an options risk already measured by its volatility? Is the answer perhaps to adjust for leverage in the portfolio? Isn't portfolio insurance (buying puts) a rather expensive long-term strategy?

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M924606

Have any Question? 


Related Questions in Basic Finance

Careers in financeuse the internet and or strayer resource

Careers in Finance Use the Internet and / or Strayer Resource Center to research career options within the field of finance. Consider the Bureau of Labor Statistics Website, and the Websites of finance professional assoc ...

Mutual fund assignmentdue date september 15 2016pick a

Mutual Fund Assignment(Due date: September 15, 2016) Pick a Mutual Fund of your choice. Visit the web site and learn about your chosen fund whatever you want to learn. Write a report, a page or so, explaining the main fe ...

Why are two gate valves required in normal practice to form

Why are two gate valves required in normal practice to form a washout valve?

In the wake of the financial crisis of 2007-2009 would you

In the wake of the financial crisis of 2007-2009, would you anticipate the bank lending channel becoming more or less important in the United States in the near future? Explain your answer.

A store will give you a 450 discount on the cost of your

A store will give you a 4.50% discount on the cost of your purchase if you pay cash today. Otherwise, you will be billed the full price with payment due in 1 month. What is the implicit borrowing rate being paid by custo ...

We covered many important topics during this class

We covered many important topics during this class. Understanding spending and income, cutting expenses, saving and investing money, building an emergency fund, improving credit, getting out of debt, protecting your asse ...

An annuity has an interest rate of 7 and makes a quarterly

An annuity has an interest rate of 7% and makes a quarterly payment of $2000. The annuity is to last for 5 years. What is the present value of the annuity?

What is the importance of geotextiles and sand in

What is the importance of geotextiles and sand in reclamation works?

Given a 10 percent interest rate compute the year 9 future

Given a 10 percent interest rate, compute the year 9 future value if deposits of $10,000 and $20,000 are made in years 1 and 5 respectively, and a withdrawal of $5,000 is made in year 7.

This week as we look at how cash is used within a company

This week as we look at how cash is used within a company, is it prudent to have excess cash on your balance sheet? What would be the reasons a company would carry excess cash? Advantages and disadvantages of an excess c ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate