--%>
Assignment Help - homework help

Economic agents- hedgers and speculators

In order for a derivatives market to function two kind of economic agents are required: hedgers & speculators. Describe.
Two kinds of market participants are essential for the operation of a derivatives market: speculators & hedgers. A speculator tries to profit from a change in the futures price. To perform this, the speculator will take a long or short position in futures contract based upon his expectations of future price movement. A hedger, conversely, desires to ignore price variation by locking in a purchase price of the underlying asset through a long position in a futures contract or a sales price through a short position. Effectively, the hedger passes off the risk of price variation to the speculator who is better capable, or at least more keen, to bear this risk.

   Related Questions in Financial Management

  • Q : Coefficient of variation is a better

    Elaborate the statement: Coefficient of variation is a better risk calculator to use than the standard deviation when estimating the risk of capital budgeting projects.

    		•
  • Q : Illustrate random walk model for

    Normal 0 false false

    		•
  • Q : What did you meant by the Value of a

    What did you meant by the Value of a Contract? Answer: Value usually implies the theoretical cost of building up a new contract by simpler products, such as replicat

    		•
  • Q : Explain the concept of the risk–return

    Explain the concept of the risk–return relationship.

    		•
  • Q : Find QSD and set up

    Company A is a AAA-rated firm wanting to issue five-year FRNs. It determines that it can issue FRNs at six-month LIBOR + 1/8 percent or at the six-month Treasury-bill rate + ½ percent. Specified its asset structure, LIBOR is the preferred index. Comp

    		•
  • Q : When is an exploitable opportunity seen

    When is an exploitable opportunity usually seen for excess returns?

    		•
  • Q : Empirical studies regarding factors

    Why do you think the empirical studies regarding factors affecting equity returns mainly showed which domestic factors were more significant than international factors, and, secondly, that industrial membership of firm was of little importance in forecasting t

    		•
  • Q : Mutual and stockholder-owned savings

    Compare and contrast mutual and stockholder-owned savings and loan associations.

    		•
  • Q : Problem related to margin account

    Suppose today's settlement price on a CME DM futures contract is $0.6080/DM. You have a short position in one contract. Your margin account presently has a balance of $1,700. The next three days' settlement prices are $0.6066, $0.6073, & $0.5989. Compu

    		•
  • Q : Describe balance of payments identity

    Describe balance of payments identity and explain its implication under the fixed & flexible exchange rate regimes.The balance of payments identity holds that the combined balance on the current & capital accounts have to be equivalent i

    		•