Spreads, Financial Management

Assignment Help:

Spreads

The difference between two futures price is referred to as ‘spread'. For the same underlying good, if there are two different prices on two different expiration dates, the underlying spread is referred as ‘intra commodity' spread (also known as a ‘time spread'). If the spread is between two futures prices for two different but related commodities, such as corn oil futures and cottonseed oil futures, it is referred to as ‘inter commodity spread'. If the price difference is between two markets for the same commodity, it is known as ‘inter-market spread'. The spread relationships are significant due to the act of speculation. Theoretically, there should be no inter-market spread as the difference in rates is adjusted by the cost-of-carrying or transportation cost, but as discussed above, if the price difference is large enough and there is a seasonality of demand and supply, price differences may occur giving rise to inter-market spreads.

 

 


Related Discussions:- Spreads

Explain implications of purchasing power parity, Explain the implications o...

Explain the implications of purchasing power parity for operating exposure. Answer: Determine if the exchange rate changes are matched by the inflation rate differential among

Components of a callable bond, A callable bond is the sale of a call ...

A callable bond is the sale of a call option by the investor to the issuer as it allows the issuer to repurchase the bond from the time it becomes callable until

What do you mean by financial leverage, Q. What do you mean by Financial Le...

Q. What do you mean by Financial Leverage? Financial Leverage: - The financial leverage perhaps defined as the tendency of the residual net profit to vary disproportionately wi

How & why does working capital affect incremental cash flow, How and why do...

How and why does working capital affect the incremental cash flow estimation for a proposed large capital budgeting project?  Explain. Several large projects require additional

Define the problems into capital budgeting analysis, What problems can take...

What problems can take place into the capital budgeting analysis if project debt is evaluated in place of the borrowing capacity created by the project? If project debt is grea

Negotiating and closing transaction, Negotiating and Closing Transaction: ...

Negotiating and Closing Transaction: A diverse set of skills and very thorough preparation is required for negotiating and closing a divestiture transaction. Facts and informat

Capital budgeting., definition and importance of capiyal budgeting

definition and importance of capiyal budgeting

Mortgage-backed securities, A mortgage-backed security is a debt an...

A mortgage-backed security is a debt and a kind of security that is backed by a pool of mortgages or a credit support from another party to a transaction. T

Determine the advantages of explicit cost, Determine the advantages of expl...

Determine the advantages of explicit cost Explicit cost of an interest bearing debt will be the discount rate which equates present value of the contractual future payments of

Inventory is sometimes thought of as a necessary evil, Inventory is sometim...

Inventory is sometimes thought of as a necessary evil.  Explain. Inventory ties up funds and these funds aren't earning an unambiguous return.  Some inventory is habitually nec

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd