Explain 2008 global financial crisis

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1. Suppose you are a derivatives trader in a local bank, and you expect to sell your holdings of $1 million of US Treasury bond in 6 month's time. If you wish to hedge against the risk of rise in market interest rates, will you buy a call option or a put option? Explain why.

2. Based on market indicators, you are convinced that the price of wheat is going to significantly increase over the next 3 months. How could you use the futures market for this-will you take a long position or a short position? Explain why.

3. CDS provide means to insure against default risk. Explain how this derivative product contributed to the 2008 global financial crisis.

Reference no: EM132908352

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