Assignment: Derivatives Markets
Based on what you have learned in Class #1, explain the following concepts using your own words and examples:
1. Provide your own discussions and examples to explain the following fundamental concepts of derivatives:
(i) Why are derivatives "Synthetics"?
(ii) Why are derivatives traded in "Zero Net Supply Markets"?
(iii) Why are derivatives "Zero Sum Games"?
2. True or False?
"Derivatives contracts cannot be created when the underlying asset is non-traded."
Explain your answer with example(s)
3. Based on your own insight and learning in Class #1, explain the concept of "Arbitrage".
Importantly, provide your original example(s) of Arbitrage Opportunity in any business or financial market settings; for example, any strategy that you think can create an Arbitrage profit.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.