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Essay / Research Paper Abstract
This 7 page paper answers 5 questions set by the student. Whether futures and options rates are ever accurate and if they are of any use to an investor, the meaning of the beta, the advantage of mutual funds, the use of futures and options and the way investor behaviour may be changed if the market is seen as either efficient or inefficient. The bibliography cites 3 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEsecquest.rtf
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Unformatted sample text from the term paper:
their use for reducing exposure to possible risk through long or short hedging. However, in reality it may be argued that the futures which are bought and sold are
often inaccurate. In any forward contract those selling the forward rate will want to make a profit, just as those buying may want to minimise a risk. There are also
many factors which cannot be fully included due to unknown interactions. However, there are patterns that can be seen and a general consensus may be recognised in the way the
rates are likely to move. In the US there has also been the use of the Federal Reserve Futures being used by many as an indicator of the way the
Federal Reserve is likely to move on interest rates (Robertson and Thornton, 1999). However, it has not been found that this is any value in terms of prediction (Robertson and
Thornton, 1999). The pattern is accuracy is the same in all market, the shorter the term of the future the more likely it is to be accurate or near accurate.
However, this does not mean it is not any use for an investor, as they can give an expert and considered opinion of the way in which the market is
going to move, meaning that despite inaccuracy they can still be useful. b. If we have an investor considering tow choices, either investing in a one year bond and
then reinvesting for another year in a second year bond, or investing in a two year bond there are several factors to consider if they believe interest rates are going
to increase. . If the interest rates increase in time for the second bond they it may be that this is the
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