Efficient Markets

Efficient Markets - Efficient Markets From Last Time You...

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Efficient Markets From Last Time You would definitely want to use futures instead of options when you want to make or take delivery on an asset. The farmer will have 1,000 metric tons of wheat harvested in 6 months, but he does not know what it will be worth. By entering into the short position of a futures contract he locks in a price and fully hedges his risk. The speculator takes the long position in hopes that the spot price on the date of delivery is greater than the price specified in the futures contract. Information in Asset Prices Savers and borrowers base investment decisions on information contained in prices observed in financial markets. When the prices of financial instruments accurately reflect the available information, these prices provide valuable signals for investment decisions. represent expectations of future value long-term bond yields provide information about expected future short-term interest rates international differences in interest rates reveal information about expected changes in exchange rates Rational Expectations
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This note was uploaded on 11/22/2011 for the course FIN FIN1100 taught by Professor Bradrifkin during the Fall '09 term at Broward College.

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Efficient Markets - Efficient Markets From Last Time You...

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