Derivatives 3

Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University

المملكة العربية السعودية وزارة التعليم الجامعة السعودية الإلكترونية

College of Administrative and Financial Sciences

Assignment-3

FIN-405-Financial Derivatives

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

Course Name: Financial Derivatives	Student’s Name:
Course Code: FIN-405	Student’s ID Number:
Semester: Second	CRN:
Academic Year:2021-22-2nd

For Instructor’s Use only

Instructor’s Name:
Students’ Grade: Marks Obtained/Out of 10	Level of Marks: High/Middle/Low

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)