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 (B)</p> Signup and view all the answers

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

<p>The lessor (D)</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 (C)</p> Signup and view all the answers

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

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

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

<p>'Lease period' terms (A)</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 (C)</p> Signup and view all the answers

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

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

What is the spot price of oil in this scenario?

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

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

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

What are the storage costs of oil in this scenario?

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

In the context of options, what does ST represent?

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

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

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

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

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

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

<p>$F - S &gt; 0$ (C)</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 (B)</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 (C)</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 (B)</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 (D)</p> Signup and view all the answers

In what way has the OTC market changed since 2008?

<p>It has become regulated (B)</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 (D)</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 (A)</p> Signup and view all the answers

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

<p>Buy (A)</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 (D)</p> Signup and view all the answers

What does a short forward contract involve?

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

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

<p>Long forward position (C)</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 (A)</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 (D)</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 (D)</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 (B)</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 (D)</p> Signup and view all the answers

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

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

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

<p>To enhance transparency (D)</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 (D)</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 (B)</p> Signup and view all the answers

What was a consequence of the Lehman Bankruptcy in 2008?

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

What is arbitrage in financial markets?

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

What role does arbitrage play in ensuring market efficiency?

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

What is the purpose of arbitrageurs in financial markets?

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

How do arbitrage opportunities affect market efficiency?

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

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