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Central bank executes the function of a clearing house. Explain how? Answer: Each and every bank keeps cash reserves with central bank. The claims of banks against one other can be simply and conven
The central bank performs as lender of last resort. Explain how? Answer: The central bank too acts as lender of last resort for other banks of the country. This means that when a commercial bank fai
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Name the additional facility that the businessman acquires in the current deposit account of bank. Answer: The businessman acquires the facility of overdraft (that is, OD) in current account of the
Open Market operation: Open Market operations term to the purchase or sale of government securities in an open market by the central bank of country.
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' s
Name the System of Note-issue in India. Answer: In India, the system of note-issue is the Minimum Reserve System. The RBI is needed to keep minimum reserves of Rs 200 crores.
State the main function of money in economy? Answer: The major function of money in an economic system is to ease the exchange of services and goods.
List the arguments (variables) of which a FX call or put alternative model price is a function. How does the call & put premium change w.r.t. alteration in the arguments?Both call & put optio
What is meant through the terminology that an option is in-, at-, or out-of-the-money? A call (put) alternative with St > E (E > St) is referred to as trading in-the-money. If St Normal 0
Describe the long position in an options contract?An option is a contract giving the long the right to buy or sell a given quantity of an asset at a particular price at some time in the future, howeve
Describe long position in a futures (or forward) contract?A futures (or forward) contract is a vehicle for purchasing or selling a stated amount of foreign exchange at a stated price per unit at a par
How can the FX futures market be utilized for price discovery?To extent that FX forward prices are an unbiased predictor of future spot exchange rates, the market anticipates whether one currency will
Why are most futures positions closed out through a reversing trade instead of held to delivery?In forward markets, about 90 percent of all contracts that are primarily established result in the short
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 deri
Illustrates the basic operation of a currency futures market.A futures contract is an exchange-traded instrument along with standardized features demonstrating contract size & delivery date. Futu
Describe the basic operation of a currency forward market The forward market is an OTC market in which the forward contract for purchase or sale of foreign currency is tailor-made among the client and
If Fiat ADRs were trading at $35 while the underlying shares were trading in Milan at EUR31.90, what could you do to make a trading profit? Employ the information in problem 1, above, to help you and
At Milan bourse, Fiat stock closed at EUR31.90 per share on Friday, September 10, 1999. Fiat trades as & ADR on the NYSE. One underlying Fiat shares equivalent one ADR. On September 10, the $/E
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
Why might it be easier for an investor wishing to diversify his portfolio internationally to purchase depository receipts instead of the actual shares of the company?A depository receipt can be purcha
Give any benefits you can think of for any company to source new equity capital from foreign investors in addition to domestic investors. An enhancement in demand will normally increase the stock pri
Explain any benefits you can think of for any company to cross-list its equity shares on more than one national exchange?A MNC that has a product market presence or manufacturing facilities in many co
Compare & contrast the several types of secondary market trading structures. There are two fundamental types of secondary market trading structures: dealer & agency. In a dealer market, the
Like an investor, what factors would you regard as before investing in the emerging stock market of a developing country? In emerging market stocks an investor needs to be concerned with the depth of