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

Obtain financial statements for microsoft for the last five

Obtain financial statements for Microsoft for the last five years either from its Web site (http://www.microsoft.com) or from the SEC's online EDGAR site (http://www.sec.gov/edgar/searchedgar/webusers.htm). First, look a ...

Look again at figure 83 on page 237 and answer the

Look again at Figure 8.3 on page 237 and answer the following questions. a. Why is the demand curve for foreign exchange downward sloping? b. Why is the supply curve for foreign exchange upward sloping? c. Who would be i ...

The risk free return is 01 expected return on the market

The risk free return is .01, expected return on the market portfolio is .08 and standard deviation of the return on the market portfolio is .02. What is the expected return on an efficient portfolio with a standard devia ...

Gun manufacturer bloodbath amp beyond currently has a cash

Gun manufacturer Bloodbath & Beyond currently has a cash balance of $750,000. It projects that cash outflows of $390,000 a month. The company pays a fee of $500 every time it sells securities through its broker and the a ...

Assignmentanswer questions-what are the two principal ways

Assignment Answer questions: -What are the two principal ways in which Congress and state legislatures exercise oversight of administrative agencies? -In what ways does the budgeting process lend itself to political cont ...

Answer both of the following questions in a 2-3 page word

Answer both of the following questions in a 2-3 page Word document: 1. To be adequately informed about the adequacy of a company's risk management, investors and creditors need information about strategies for holding de ...

Suppose your firm had issued a 12 percent annual coupon

Suppose your firm had issued a 12 percent annual coupon, 15-year bond, callable at par at the 8th year. It is now two years later, so the bonds are not callable for another 6 years. At this time, new bonds could be issue ...

The concentric joint of problem 4 is subjected to an

The concentric joint of problem 4 is subjected to an increase in temperature of 1008F. Does this increase or decrease the tension in the bolts? By how much? (Assume that the coefficient of linear expansion of the bolts i ...

A company exports 37000 products to chile nbspunder an

A company exports 37,000 products to Chile  under an import license that expires in five years. In Chile, the products are sold for the Chile peso equivalent of $45. Direct shipping costs in the United States and indirec ...

Ethical dilemma- cindy and jack have always practiced good

Ethical Dilemma - Cindy and Jack have always practiced good financial habits, in particular, developing and living by a budget. They are currently in the market to purchase a new car and have budgeted $300 per month for ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen