Why are call and put options considered risky?

July 7, 2024 No Comments

A: As with most investment vehicles, risk to some degree is inevitable. Option contracts are notoriously risky due to their complex nature, but knowing how options work can reduce the risk somewhat. There are two types of option contracts, call options and put options, each

Why does the time value of money assume that a dollar today is worth more than a dollar tomorrow?

June 30, 2024 No Comments

A: The time value of money, or TVM, assumes a dollar in the present is worth more than a dollar in the future because of variables such as inflation and interest rates. Inflation is the general increase in prices, which means that the value of

Why does the time value of money assume that a dollar today is worth more than a dollar tomorrow?

July 7, 2024 No Comments

Why does the time value of money assume that a dollar today is worth more than a dollar tomorrow?

July 7, 2024 No Comments

Why is the British pound / U.S. dollar currency pair known as “trading the cable”?

June 30, 2024 No Comments

A: The British pound / U.S. dollar currency pair is one of the oldest and most widely-traded currency pairs in the world. The term cable is a slang term used by forex traders to refer to the exchange rate between the pound and dollar and

Why is the British pound / U.S. dollar currency pair known as “trading the cable”?

July 7, 2024 No Comments

Why is the British pound / U.S. dollar currency pair known as “trading the cable”?

July 7, 2024 No Comments

Why is the initial value of a forward contract set to zero?

June 30, 2024 No Comments

A: Forward contracts are buy/sell agreements that specify the exchange of a specific asset and on a specific future date but on a price that is agreed upon today. They do not require early payment or down payment unlike some other future commitment derivative instruments.

Why is the initial value of a forward contract set to zero?

July 7, 2024 No Comments

Why is the U.S. dollar shown on the top of some currency pairs and on the bottom of others?

June 30, 2024 No Comments

A: All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called the quote or “counterpart” currency. Usually the most dominant currency, in terms of the other currencies against which it trades, is quoted

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