How can derivatives be used for risk management?

July 8, 2024 No Comments

A: Derivatives could be used in risk management by hedging a position to protect against the risk of an adverse move in an asset. Hedging is the act of taking an offsetting position in a related security, which helps to mitigate against adverse price movements.

How can I calculate the delta adjusted notional value?

July 8, 2024 No Comments

A: The delta adjusted notional value is used to show the value of an option. This is different from most other derivatives, which use gross notional value or, in the case of interest rate derivatives, 10-year bond equivalent value. Investors can calculate the delta adjusted notional

How can I identify stocks that also trade as options?

July 8, 2024 No Comments

A: The trading of options has become increasingly popular among retail investors as they become aware of the different ways that options can be used to generate profits. The interesting thing about option strategies is that investors can use them in all types of market

How do currency swaps work?

July 8, 2024 No Comments

A: A currency swap, also known as a cross-currency swap, is an off-balance sheet transaction in which two parties exchange principal and interest in different currencies. The parties involved in currency swaps are generally financial institutions that either act on their own or as an

How Do Fully Diluted Shares Affect Earnings?

July 8, 2024 No Comments

A: Basic outstanding shares and fully diluted shares measure the quantity of stock issued by a company using different methodologies. Outstanding shares are the company’s stock that have been authorized and issued, representing ownership of the company by investors or institutions holding those shares. Fully diluted shares include

How do I calculate a forward rate in Excel?

July 8, 2024 No Comments

A: You need to have the zero-coupon yield curve information to calculate forward rates, even in Microsoft Excel. Once the spot rates along that curve are known (or can be calculated), compute the value of the underlying investments after interest has been accrued and leave

How do I change my strike price once the trade has been placed already?

July 8, 2024 No Comments

A: The strike price of a bought or sold option cannot be changed once that option is traded. Rather, the strike price of the option is predetermined. The only way to change the strike price for a trade is to offset that trade and then

How do I set a strike price for a future?

July 8, 2024 No Comments

A: Strike prices can be set for put and call options, but investors engaged in futures contracts are obligated to trade the underlying asset at the expiration date, regardless of price. Most stock futures do not make it to the expiration date – for a

How do I set a strike price for an option?

July 8, 2024 No Comments

A: The strike price of an option is the price at which the contract can be exercised. The strike price of a stock and an index option is fixed in the contract. Depending on the amount of premium you want to spend, you may want

How does the ISIN numbering system work?

July 8, 2024 No Comments

A: The International Securities Identification Numbering system (ISIN) defines an international standard set up by the International Organization for Standardization (ISO), with ISO6166:2013 marking the latest incarnation. The system codes securities that include stocks, bonds, options and futures with unique identification numbers. ISIN identifiers are administered by a National Numbering Agency (NNA) in each

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