1.Currency derivatives can be classified into instruments with Essay

1.Currency derivatives can be classified into instruments with symmetrical(fixed)and crookedal(open) outcomes.Define their respective characteristics, and use examples to illustrate your answer - Essay Examplefutures are symmetrical if mavin can enter into a forward at a particular worth, the price might all go up or come down, and so, ace can make either profit or a loss. Forwards are quite common in commodities, and can be used either for speculation or for hedging.Eg If a mortal has an order to ship kB0 tons of steel for a period of 6 months at a prefixed price of $1000 per ton. And the person is expecting the price of steel to increase. So, to environ against the price risk, the person enters into a forward purchase agreement, for 10000 tons 6 months hence. The person localise is now fully hedged if the price of steel increases as expected, person will either strike a delivery from the forward seller, or a net settlement. If the price comes down, person will be obliged to settle by making a payment for the price difference to the forward seller, except will be fully compensated by the pre-fixed price it gets from its own forward sale contract.2. Options rush an asymmetric return profile an option is an option with one party. The option will be class periodd yet when the purchaser of the option is in-the-money. Therefore, the only loss in an option is the cost of writing and carrying the option. Hence, options have an asymmetric return profile. On the other hand, the option-seller only makes returns by way of fees or premium for selling the option, against which the person takes the risk of being out-of-money. If the option is not exercised, person makes fees, but if the option is exercised, considerably, the person may lose.For example, if one person is holding a security of $1000 buys an option to put the security at its certain price with some other person. Now if the price of the security goes down to $900. The person may exercise to sell the option of the security to some other person at the agreed price of $1000 to protect against the loss of account of turn down in the market value. If, on the other hand, the price of the security is increased to $1100,