Stock index futures contracts have become very popular

Assignment Help Financial Management

Reference no: EM131075722

Since their introduction, stock index futures contracts have become very popular and are now widely traded by finance professionals. Many factors, including (1) the current price of the underlying stock index, (2) the time to contract maturity, and (3) the dividends paid to the stocks in the underlying index, will affect the settlement price of a stock index futures contract. What is the fourth primary factor involved in stock index futures contract pricing, and how does this factor affect settlement prices?

Reference no: EM131075722

Questions Cloud

Describe the nature of the basis risk in the hedge : A multinational corporation is about to embark on a major financial restructuring program. One critical stage will be the issuance of seven-year Eurobonds sometime within the next month. Describe the nature of the basis risk in the hedge. In particul..

Comment specifically on the role that dividends play : Describe the condition under which it would rational to exercise both an American-style put and call stock option before the expiration date. In both cases, comment specifically on the role that dividends play.

Supported with a convincing-analysis-based argument : What is your assessment of Walt Disney Company's financial and operating performance in fiscal years 2010-2013? What is your assessment of the relative contribution of each business unit to the financial strength of Disney based on the 2012 and 2013 ..

Advantage of spurious upward ticks in stock prices : On October 19, 1987, the stock market (as measured by the Dow Jones Industrial Average) lost almost one-quarter of its value in a single day. Nevertheless, some traders made a profit buying call options on the stock index and then liquidating their p..

Stock index futures contracts have become very popular : Since their introduction, stock index futures contracts have become very popular and are now widely traded by finance professionals. What is the fourth primary factor involved in stock index futures contract pricing, and how does this factor affect s..

Underlying asset into synthetic risk-free security : “Although options are risky investments, they are valued by virtue of their ability to convert the underlying asset into a synthetic risk-free security.” Explain what this statement means, being sure to describe the basic three-step process for valui..

What is after-tax cost of debt : After-tax Cost of Debt The Heuser Company's currently outstanding bonds have a 8% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 35%, wha..

Futures contracts on treasury bonds : We have futures contracts on Treasury bonds, but we do not have features contracts on individual corporate bonds. We have cattle and hog futures but no chicken futures. Explain why the market has developed in this manner. What do you think are the mo..

Briefly describe the hedging strategy : You are the chief financial officer of a large multinational company; and six months from now you will be receiving a settlement payment of $50 million, which you plan to invest in 10-year U.S. Treasury bonds. Briefly describe the hedging strategy us..

User Account

All Pages