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标题: Reading 38: Risk Management App....ures Strategies－LOS f [打印本页]
作者: tycoon    时间: 2008-9-16 16:40     标题: [2008] Session 13－Reading 38: Risk Management App....ures Strategies－LOS f

CFA Institute Area 8-11, 13: Asset Valuation
Session 13: Risk Management Applications of Derivatives
Reading 38: Risk Management Applications of Forward and Futures Strategies
LOS f, (Part 2): Demonstrate the use of forward contracts to reduce the risk associated with a future transaction (receipt or payment) in a foreign currency.
作者: tycoon    时间: 2008-9-16 16:46

In regards to Table 2, which of the following is TRUE? The:

A)receiving foreign currency position is incorrect; the action is also incorrect.
B)
receiving foreign currency position is correct; the action is incorrect.
C)paying foreign currency position is correct; the action is correct.
D)paying foreign currency position is incorrect; the action is incorrect.

Answer and Explanation

Being long the currency means holding or expecting to receive a foreign currency, therefore to hedge this foreign currency exposure you must sell forward contracts (deliver foreign currency and receive domestic currency at the expiration of the contract).

Being short the currency indicates either an expectation to pay the foreign currency or the future obligation to deliver foreign currency which has already been sold. To hedge this foreign currency exposure it is necessary to buy forward contracts (deliver home currency and receive foreign currency at the expiration of the contract).

Being long the currency means holding or expecting to receive a foreign currency, therefore to hedge this foreign currency exposure you must sell forward contracts (deliver foreign currency and receive domestic currency at the expiration of the contract).

Being short the currency indicates either an expectation to pay the foreign currency or the future obligation to deliver foreign currency which has already been sold. To hedge this foreign currency exposure it is necessary to buy forward contracts (deliver home currency and receive foreign currency at the expiration of the contract).

Regarding the advantages of futures contracts, which statement is FALSE?

A)Statement 1.
B)
Statement 4.
C)Statement 2.
D)Statement 3.

Answer and Explanation

Forward contracts have higher transactions costs than futures contracts because they are customized agreements.

All of the following are advantages of using futures and forward contracts to hedge risk in a portfolio, relative to adjusting the actual debt and equity positions, EXCEPT:

A)it is typically less expensive to use derivatives than to adjust the actual portfolio.
B)
the manager gets a leverage effect with futures because the only required investment is the margin deposit.
C)it is less disruptive to the portfolio and the portfolio managers to use futures than it is to buy and/or sell assets within the portfolios.
D)liquidity, at least for shorter maturity contracts, is often greater in the futures market than in the underlying market.

Answer and Explanation

The point of a hedge is not to leverage a position. If the investor is speculating, or even if they are pre-investing or turning cash into synthetic equity or debt, there may be a leverage advantage to futures rather than buying the underlying. However, with respect to hedging, leverage is not the desired outcome. The main advantages to using futures and forwards rather than adjusting the underlying security positions are cost, less disruption, and greater liquidity.





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