BUU44650 Derivatives Assignment Example TCD Ireland
You’re probably wondering how you can use derivatives to make profitable investments. In order to make profitable investments, you need to understand what it is that you’re investing in. What you’re investing in is a name-brand opportunity. A name-brand opportunity is an opportunity where the company’s name is involved.
If you were to invest in a company where the name wasn’t involved, you would be investing in a company where the name isn’t worth investing in. The best way to understand what you’re investing in is to think about it in terms of returns. In terms of returns, you’re going to be making money on the investments you make.
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In this course, there are many types of assignments given to students like individual assignments, group-based assignments, reports, case studies, final year projects, skills demonstrations, learner records, and other solutions given by us. We also provide Derivatives Mid-Term Examination and final examination help for Irish students.
In this section, we are describing some tasks. These are:
Assignment Task 1: Provide an understanding of derivatives and introduce the analytics of derivative valuation
The derivatives business is a huge and complex world. You’ve probably never heard of it, or you’ve never heard of it until now. In short, derivatives are financial products. A financial product is a product that has the potential to provide benefits to the issuer (the person who might use it) other than just profits. These benefits can include, among others, receiving a financial return on its investment, getting a commission on an offer, or receiving tax benefits.
There are two main types of derivatives: public and private. The public derivatives are available to all firm owners. The private derivatives are only for the fewest possible customers, and they are only available to summit Global Inc. and its customers. The risks associated with these products are also important to consider. Let’s get started!
The fundamental interest of this article is in the derivative marketplace. There are users all over the world who are interested in understanding these markets.
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Assignment Task 2: Demonstrate how to value forward, futures, swaps, and options
A derivative is a security that derives its value from the price of an underlying asset. The most common underlying assets are stocks, bonds, commodities, and currencies.
Forward contracts: A forward contract is an agreement between two parties to buy or sell an asset at a fixed price on a specified future date. For example, Company A might agree to sell Company B 100 barrels of oil at $50 per barrel on January 1, 2020.
Futures contracts: A futures contract is very similar to a forward contract, except that it’s traded on an exchange and has standardized terms and conditions. For example, the Chicago Mercantile Exchange (CME) offers futures contracts on dozens of commodities, including gold, silver, corn, crude oil, and foreign currency. Futures contracts are standardized in terms of quantity, quality, delivery date, and settlement rules.
Swaps: A swap is an agreement between two parties to exchange cash flows on a specified schedule. For example, suppose you have $100,000 now but need $120,000 in five years for your child’s college tuition. You could take the $100,000 and buy a 5-year bond yielding 6%. But if you prefer to keep your money in cash, you can enter into an interest rate swap with someone else who has $120,000 five years from now and is willing to exchange that sum for your $100,000 today (with both of you agreeing to make the exchange at maturity).
Options: An option is a contract that gives one party (the buyer) the right, but not the obligation, to buy or sell an asset at a fixed price (called the strike price or exercise price) for a fixed period of time. The other party (the seller) is obligated to sell or buy the asset if the buyer exercises his option. Options are traded on an exchange, and there are two types of options: calls and puts. A call option gives its owner the right to buy 100 shares of stock at a fixed price for a specific period of time.
For example, Bob might buy a four-month call option to buy Company A’s stock at $50 a share. This means that Bob has the right, but not the obligation, to buy 100 shares of Company A’s stock from the call option writer for $50 a share anytime during the next four months. Conversely, a put option gives its owner the right to sell 100 shares of a company’s stock at a fixed price for a specific period of time.
Assignment Task 3: Describe and appraise how derivatives can be used to achieve various hedging and speculative strategies
Derivatives can be used to achieve a variety of hedging and speculative strategies. A derivative is a financial asset or security that is built to provide some return on investment (“returns) in the future. A common use of derivatives is to provide financial hedges for securities. When the security prices go up, the liabilities of the security may rise, which would lead to an increase in its value. The value of the security, on the other hand, would be worth more if it had less value or if it had been touched by something bad.
This is a way to protect the security and ensure that it will not lose value. One example of this would be an investor who invests in a company’s stocks. They could use options to hedge the risk associated with their investment in case the stock prices fall. This is because if the stocks fall, then the option will rise in value, which will offset some of the loss in value of their stock. This can be done using covered calls, which are options where you sell your stock at a certain price while you buy it back at a lower price.
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Assignment Task 4: Discuss various types of derivatives such as options on stock indices and currencies, futures options, and exotic options
Options on stock indices and currencies:
These are used by investors to either gain leverage or hedge risk. When you have an option on an index, you will make a certain amount of money if the index increases in value. If it goes down, then you will lose a certain amount of money. This is used by investors to protect themselves from losses in case the market crashes.
These are options that give investors the right to buy or sell a commodity at a particular price at a specified time in the future. These are used by farmers who want to protect themselves from losses due to price fluctuations when they sell their produce.
These are options that have very specific characteristics and can be very hard for investors to understand how they work. They are often used by large companies like Microsoft and IBM to hedge their risk.
Assignment Task 5: Evaluate previous derivative mishaps and what we can learn from them
There have been a number of derivative mishaps in the past, and each one has offered valuable insights into how to prevent such disasters from happening again. Here are some key lessons that we can learn from these episodes:
1. Derivatives should only be used for hedging risks, not for speculation.
2. Derivatives should be properly understood and analyzed before being used.
3. There should be adequate risk management controls in place to monitor and manage derivatives exposure.
4. Derivatives usage should be continually reviewed and updated to reflect changing market conditions.
5. There must be robust internal controls in place to ensure that all relevant risks are being taken into account when derivatives are used.
6. There should be proper training on the uses and potential risks of derivatives.
7. Management, boards of directors, regulators, traders, brokers/dealers, and clients must not ignore warnings from employees about derivatives being used in inappropriate ways.
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