1.Currency derivatives can be classified into instruments with Essay

1.Currency derivatives can be classified into instruments with symmetrical(fixed)and asymmetrical(open) outcomes.Define their respective characteristics, and use examples to illustrate your answer - Essay Example futures are symmetrical: if one can enter into a forward at a particular price, the price might either go up or come down, and so, one can make either profit or a loss. Forwards are quite common in commodities, and can be used either for speculation or for hedging. Eg: If a person has an order to ship 10000 tons of steel for a period of 6 months at a prefixed price of $1000 per ton. And the person is expecting the price of steel to increase. So, to hedge against the price risk, the person enters into a forward purchase agreement, for 10000 tons 6 months hence. The person position is now fully hedged: if the price of steel increases as expected, person will either claim a delivery from the forward seller, or a net settlement. If the price comes down, person will be obliged to settle by making a payment for the price difference to the forward seller, but will be fully compensated by the pre-fixed price it gets from its own forward sale contract. 2. Options have an asymmetric return profile: an option is an option with one party. The option will be exercised only when the purchaser of the option is in-the-money. Therefore, the only loss in an option is the cost of writing and carrying the option. Hence, options have an asymmetric return profile. On the other hand, the option-seller only makes returns by way of fees or premium for selling the option, against which the person takes the risk of being out-of-money. If the option is not exercised, person makes fees, but if the option is exercised, considerably, the person may lose. For example, if one person is holding a security of $1000 buys an option to put the security at its current price with some other person. Now if the price of the security goes down to $900. The person may exercise to sell the option of the security to some other person at the agreed price of $1000 to protect against the loss of account of turn down in the market value. If, on the other hand, the price of the security is increased to $1100,

Top paper Research Example | Topics and Well Written Essays - 1000 words

Top - Research Paper Example enic activities such as burning of fossil fuels and emission of green house gases have been said to be the prime suspects many conservative scientists still believe that Global warming is a natural phenomenon and not a man-made one. After the Earth’s origin the temperature of the earth has changed continuously throughout the geologic time period. As a matter of fact global warming is an important phenomenon that is important for survival of life on Earth without which the earth’s temperature would drop drastically. Conservatives believe that till date there is no credible or reliable information about the phenomenon of Global warming. A thorough study of the Geologic time scale would reveal that instances of global warming has even occurred in the past with temperatures of Earth exceeding than what it is today. The Paleocene-Eocene Thermal Maximum (PETM) is one of the most recent cases of Global warming said to have occurred almost 56 million years ago (Bowen et al, 2004, p.495). This not only caused warm temperature conditions but also caused release of almost 2000 x 109 metric tons of carbon  into the ocean waters causing ocean acidification, a phenomenon which can be seen today (Zachos et al, 2005, p.1611). Today rapid acidification is attributed to global warming however such acidification is known to occur thousands of years ago when man’s harmful anthropogenic activities did not exists. Global warming is known to be the major cause of melting of ice caps and rising of the water level. However, recent studies of the polar ice caps have shown that in most areas of the Arctic the ice caps have thickened. GIS images have shown that in 2012 polar ice-caps covered almost 3.91 square kilometers whereas as of 2014 the polar ice-caps cover almost 5.62 million square kilometers which is in contrast to the global warming model (Rose, 2014). If man’s activities were to be the cause of global warming then such a phenomenon would not have occurred since Man