Ijara - Conclusion
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Questions and Answers

What needs to be ascertained to avoid disputes in a leased property?

  • The lessor's liabilities
  • The lease period
  • The ownership transfer
  • The contracted usufruct (correct)

    • In an Ijara contract, what must be specified to ensure clarity?

  • The lease period (correct)
  • The lessor's liabilities
  • The leased property's features
  • The ownership transfer

    • Which party in a lease agreement must specify the lease period?

  • A third-party mediator
  • The lessee
  • The lessor (correct)
  • An attorney

    • What is the primary focus when engaging in an Ijara contract?

    <p>Specifying lease period</p> Signup and view all the answers

    Who is primarily responsible for avoiding disputes related to usufruct in a lease?

    <p>The lessor</p> Signup and view all the answers

    What could happen if the lease period is not clearly specified in an Ijara contract?

    <p>Disputes may arise</p> Signup and view all the answers

    In an Ijara contract, what should be avoided to ensure a smooth transaction?

    <p>Transferring ownership rights</p> Signup and view all the answers

    When considering an Ijara contract, what should be the focus of negotiation?

    <p>'Lease period' terms</p> Signup and view all the answers

    What could happen if the contracted usufruct is not clearly defined in a lease agreement?

    <p>Disputes may arise</p> Signup and view all the answers

    Which aspect of an Ijara contract ensures the smooth functioning of the agreement?

    <p>'Lease period' specification</p> Signup and view all the answers

    What is the spot price of oil in this scenario?

    <p>US$50</p> Signup and view all the answers

    What is the quoted 1-year futures price of oil in this scenario?

    <p>US$40</p> Signup and view all the answers

    What are the storage costs of oil in this scenario?

    <p>2% per annum</p> Signup and view all the answers

    In the context of options, what does ST represent?

    <p>The underlying asset price at expiration</p> Signup and view all the answers

    What is the payoff to the put seller in options trading?

    <p>$- Max(0, X - ST)$</p> Signup and view all the answers

    Based on the given information, is there an arbitrage opportunity in the gold market?

    <p>Yes, due to the difference between the forward and spot prices.</p> Signup and view all the answers

    What is the formula for calculating the 1-year forward price of gold?

    <p>$F = S * (1 + r)^T$</p> Signup and view all the answers

    In the described arbitrage trading strategy for gold, what is the profit earned at the end of one year?

    <p>$60</p> Signup and view all the answers

    What condition determines the existence of an arbitrage opportunity in the context of forward pricing?

    <p>$F - S &gt; 0$</p> Signup and view all the answers

    What determines whether there is an arbitrage opportunity in the oil market scenario presented?

    <p>Spot price greater than futures price</p> Signup and view all the answers

    What is the purpose of a central counterparty (CCP) in the OTC market?

    <p>To stand between the two sides of a transaction like an exchange</p> Signup and view all the answers

    Where are derivatives primarily traded through an open outcry system?

    <p>On organised exchanges like the Chicago Board Options Exchange</p> Signup and view all the answers

    Prior to 2008, how were financial transactions handled in the OTC market?

    <p>With banks acting as market makers quoting bids and offers</p> Signup and view all the answers

    In what way has the OTC market changed since 2008?

    <p>It has become regulated</p> Signup and view all the answers

    How do traders typically execute transactions in the OTC market?

    <p>By contacting each other directly over the phone</p> Signup and view all the answers

    What is the forward price for a contract?

    <p>The price that would make the contract worth zero</p> Signup and view all the answers

    In a long forward contract, the party has agreed to:

    <p>Buy</p> Signup and view all the answers

    What is the payoff for a short position in a forward contract at maturity?

    <p>$1,552,600</p> Signup and view all the answers

    What does a short forward contract involve?

    <p>Selling an asset in the future</p> Signup and view all the answers

    Which trading strategy has 'unlimited gain potential' but 'limited loss potential'?

    <p>Long forward position</p> Signup and view all the answers

    In the context of gold pricing, what is the formula for calculating the fair price according to the text?

    <p>F = S (1+r )T</p> Signup and view all the answers

    Based on the information provided, what would happen if F - S(1+r)T was not equal to zero?

    <p>There would be an arbitrage opportunity</p> Signup and view all the answers

    What is the main objective of standardized OTC products being traded on swap execution facilities (SEFs)?

    <p>Reduce systemic risk</p> Signup and view all the answers

    What trading strategy is suggested in the text to exploit the arbitrage opportunity without an initial investment?

    <p>Borrow at the spot price and sell it forward</p> Signup and view all the answers

    Why must CCPs be used to clear standardized transactions between financial institutions in most countries?

    <p>To reduce counterparty risk</p> Signup and view all the answers

    What is the profit earned in the provided arbitrage trading strategy involving gold?

    <p>$40</p> Signup and view all the answers

    What is the purpose of reporting all trades to a central repository?

    <p>To enhance transparency</p> Signup and view all the answers

    In the context of gold pricing, what does the formula T=1 + (1300 - 1260) - 1.05*1200 represent?

    <p>Cash flows at time T=1</p> Signup and view all the answers

    In terms of reducing risk, what is the benefit of trading standardized OTC products on SEFs?

    <p>Reduced counterparty risk</p> Signup and view all the answers

    What was a consequence of the Lehman Bankruptcy in 2008?

    <p>Increase in counterparty risk</p> Signup and view all the answers

    What is arbitrage in financial markets?

    <p>Earning a profit from the price differences of identical assets</p> Signup and view all the answers

    What is the Law of One Price in relation to asset pricing?

    <p>Assets must have the same selling price in all markets</p> Signup and view all the answers

    What role does arbitrage play in ensuring market efficiency?

    <p>It eliminates price differences on identical assets</p> Signup and view all the answers

    How do efficient markets compensate investors according to the text?

    <p>By offering risk-free returns through arbitrage opportunities</p> Signup and view all the answers

    What is the purpose of arbitrageurs in financial markets?

    <p>To maintain stable prices of assets</p> Signup and view all the answers

    How do arbitrage opportunities affect market efficiency?

    <p>They generate abnormal returns violating market efficiency</p> Signup and view all the answers

    What does the term 'relative valuation methodology' refer to?

    <p>'Determining the correct price of one asset relative to another</p> Signup and view all the answers

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