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16 Cards in this Set
- Front
- Back
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17.67B - A forward commitment is a binding promise to ...
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Forward commitment - is a binding promise to buy/sell an asset or make a payment in the future.
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17.67B - 3 example of forward commitments
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1. Forward contracts
2. Futures contracts 3. Swaps |
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17.67B - Forward contracts obligate one party to ______ and one to _____ a ________ on a___________
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Obligate one party to buy, and another to sell, a specific asset at a predetemined price at a specific time in the future.
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17.67B - Swaps contracts are equivalent to
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A series of forward contracts on interest rates, currencies, or equity returns
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17.67B - Futures contracts are...
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Forward contracts that are exchange-traded, quite liquid, and requite daily settlement of any gains or losses.
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17.67D - Riskless arbitrafe refers to earning
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More than the risk-free rate of return with no risk, or earning an immediate gain with no possible future liability
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17.67D - Arbitrage can be expected to force the
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Prices of two securities of portfolios of securities to be equal if they have the same future CF's regardless of future events.
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17.72B - A covered call position is made up of a...
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Share of stock and a short (written) call.
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17.72B - Covered call profits and elosses are measured relative to the
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Net cost of this combination (So - premium)
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17.72B - The purpose of selling a covered call is to
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enhance income by trading the stocks upside potential for the call premium
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17.72B - The upside potential on a covered call is limited
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(X - So) + call premium received.
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17.72B - The protective put is a strategy to
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protect against a decline in the value of the stock
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17.72B - protective put is consists of
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buyng a share of rock and buying a put,
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17.72B - protective put profit/loss are measured...
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relative to the net cost (So + premium)
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17.72B - Maximum gains on a protective put are...
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Unlimited, but redcued by the put premium paid.
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17.72B - On a protective put, Maximum losses are limited to
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(So - X) + put premium paid
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