Derivatives markets are volatile by nature, so the risk to speculators is high.
ID: 2768651 • Letter: D
Question
Derivatives markets are volatile by nature, so the risk to speculators is high. Since speculators bear the risk, the derivatives markets become stable for hedgers. generally transfer risk rather than eliminate risk. Based on your understanding of the reasons why the derivatives markets have grown more rapidly than any other major market in recent years, complete the following statements: Analytical techniques have been developed that have made it easier to establish prices. Globalization and integrative technologies have made it for counterparties in different markets to work with each other. Globalization has increased both the importance of the currency markets and the need to the exchange rate risks associated with global trade. The Black-Scholes Option Pricing Model was developed to help make a transparent basis for pricing hedges, making the counterparties comfortable with deals.Explanation / Answer
derivatives market are volatile so the risk to speculators is high. Since speculators bear the risk, the derivatives markets become less stable for hedgers.
A risk mitigation plan generally transfer risk rather than eliminate risk.
Analytical techniques have been developed that have made it easier to establish market prices.
Globalisation an integrative technologies have made it high for counterparts in different markets work with each other
Globalisation has increased both the importance of the currency markets and the need to decrease the exchange rate risk associated with global trade.
The Black-Scholes Option Pricing Model was developed to help make a transparent basis for pricing hedges, making the counterpanes more comfortable with deals.
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