Explain the Differences Between Using Futures and Options Contracts to Hedge

question 25

Essay

Explain the differences between using futures and options contracts to hedge interest rate risk.Use diagrams where possible to support your points.

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Definitions:

Pyloric Sphincter

The ring of muscle that regulates the passage of food from the stomach to the duodenum of the small intestine.

Gastric Ulcer

A sore on the lining of the stomach or duodenum often caused by infection, medication, or chronic stomach acid irritation.

Esophagitis

Inflammation of the esophagus, which can cause pain, difficulty swallowing, and other discomforts.

Duodenal Ulcer

A type of peptic ulcer that occurs in the upper part of the small intestine, known as the duodenum.