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Homework answers / question archive / Discuss - the evolution of the world's derivative markets and -possible reasons why derivative markets were introduced relatively late in Turkey Limit your discussion to a maximum of 400 words
Discuss - the evolution of the world's derivative markets and -possible reasons why derivative markets were introduced relatively late in Turkey Limit your discussion to a maximum of 400 words.
You are a wholesale client intend to buy some long-term bonds. You receive a two-way quote of 6.25:6.22% from dealer X and of 6.24:6.21% from dealer Y. What quote is the most attractive to you?
|
A. |
6.25% |
|
B. |
6.22% |
|
C. |
6.24% |
|
D. |
6.21% |
Derivatives market are those market which will be offering a large number of securities which are used by speculators and which are also used by investors for having their portfolio and the derivative instruments do not have their own value but they will be deriving the value out of the underlying securities.
Derivatives market will be offering various types of securities like futures as well as options and swaps and swaptions so they will be providing with a large number of security which can be used to speculate into the market using a low cost and they will be also having a timeline under which they will be have to be exercise so and speculator who is trying to speculate about the movement of a certain securities into the derivatives market can have exposure into the securities because these can be customised even though those are standardized contract but they can be customised for hedging purposes and speculation purposes as well.
Derivatives markets are embedded into the overall exchange which are providing for an additional speculation and high level of liquidity and capital infusion into the market which are estimating the movement of different securities in advance and it will be helping to reflect these prices into the security so they are also helping in a pricing forecasting mechanism for various securities so these derivatives market will be ensuring a high level of liquidity and a high level of transparency in overall operations in an organisation.
Derivatives with relatively introduced late in Turkey because they felt that derivatives were highly destructive instrument and their will be destabilizing completely the Turkey market so they didn't implemted this derivative contracts early, but due to their increasing popularity and enhancement of the market transparency, derivative contracts have been adopted into the mechanism of performance of exchanges in Turkey.
Answer :
|
C. |
6.24% |
6.25:6.22% from dealer X means he is ready to sell bonds at 6.25% and ready to buy bonds at 6.22%
6.24:6.21% from dealer Y means he is ready to sell bonds at 6.24% and ready to buy bonds at 6.22%
as we want to buy we will see lowest selling price available which is 6.24% hence the answer is C. 6.24%
