Derivatives 3

College of Administrative and Financial Sciences

Assignment-3

FIN-405-Financial Derivatives

Due Date: 05/05/2022@ 23:59

For Instructor’s Use only

General Instructions – PLEASE READ THEM CAREFULLY

· The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.

· Assignments submitted through email will not be accepted.

· Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

· Submissions without this cover page will NOT be accepted.

Assignment 3

Submission Date by students: 05 May 2022-11:59 PM(Thursday)

Place of Submission: Students Grade Centre via blackboard.

Marks: 10 Marks

Q1. Explain the classification of Future traders by trading style? ( Marks-3)

Q2. Suppose there is a commodity in which the expected future spot price is $60.To induce investors to buy futures contracts, a risk premium of $4 is required. To store the commodity for the life of the futures contract would cost $5.50.

Find the future s price? (Marks-3)

Q3. Explain the difference between a short hedge and a long hedge. ( Marks-2)

Q4. Briefly explain Interest rate swap and currency swap . (Marks-2)