Question: 1. Differentiate between unhedged, selectively hedged, fully hedged and over hedged with an example.
2. Discuss the following statement " Market risk is identical in both spot and forward market" Your answer should include examples differentiating between spot market and forward market exposure.
3. Discuss the following question in relation to corporate hedging decision "Management is fully responsible for all hedging decision made by a corporate and need to develop an appropriate strategy to identify, evaluate, access and report their hedging decision"
4. With the use of an example show how spot and forward prices are related and discuss how the following will have an impact the cost of carry model
a. the risk free rate
b. storage cost
c. level of inventory
d. any disbursement obtained