Financial Management

U.S. oil benchmark crashes below $0 a barrel to mark historic plunge A pumpjack operates above an oil well at night in the Bakken Formation in North Dakota.Bloomberg News/Landov A futures market is a central financial exchange where people can trade standardized futures contracts. A futures exchange provides physical or electronic trading venues, which can be organized as non-profit member-owned organizations or for-profit organizations. Futures exchanges can also be integrated under other types of exchanges, such as stock markets, options markets and bond markets. Futures contracts are sometimes used by corporations and investors as a hedging strategy. Hedging refers to a range of investment strategies that are meant to decrease the risk experienced by investors and corporations. Questions; The futures market is referred to as an auction market, whereby producers and suppliers of commodities endeavour to avoid market volatility; in other words, producers and suppliers negotiate contracts with an investor who agrees to take on probable risk and reward, based on the expected volatility of the market. 1. Critically discuss the theoretical concept of futures contracts as a risk management tool, used by any would be investor to decrease future risk exposure or market volatility. (15 marks) 2. Review and discuss the collapse of the Futures Oil Market, which fell into the negative realm in May 2020. (15 marks) What were the main reasons for this fall into the negative realm? Critically discuss. (20 marks) Total 35 marks 3. After May 2020, what are the prospects of futures contracts as a significant risk management tool for firms? Discuss critically. (30 marks) Students are requires to reference all your material, inclusive of books, journals, articles, web articles and relevant web sites, via footnotes and relevant citations must be in the APA format. The practice of plagiarism is prohibited in this course and attracts a penalty. See Course Page under Quicklinks at https://courses.open.uwi.edu/ on the policy on plagiarism. Any breaches of this policy will be severely dealt with. Word limit is 2500- 3000 words. Total marked out of 80 to be converted into 45 marks. Dimension Excellent Good Satisfactory Poor Introduction (5 marks) The introduction and objectives are clearly stated. Background and context are clearly articulated and linked to objectives effectively. (5 marks) The introduction and objectives are clear. Background and context are partially described and mostly linked to objectives. (4 marks) The introduction and objectives are clear but the background and context are not well described nor clearly linked to objectives. (3 marks) The introduction is vague. Background and context are vague or absolutely lacking and there are no clear links to objectives. (0-2 marks) Profiles (10 marks) Profiles meet all requirements. (9-10 marks) Profiles meet most requirements. (7-8 marks) Profiles meet some requirements. (5-6 marks) Profiles meet few or no requirements. (0-4 marks) Analysis (30 marks) Analysis is highly relevant to the assignment requirements and presented clearly and logically. Very strong link made between theory and practice. (27-30 marks) Analysis is relevant to the assignment requirements but is not always presented clearly and / or logically. Strong link made between theory and practice. (21-24 marks) Analysis is somewhat relevant to the assignment requirements. At times, the analysis is not clearly or logically presented. Fair link made between theory and practice. (15- 18 marks) Analysis is not relevant to the assignment requirements. Analysis is vague and illogical. The link between theory and practice is unclear and illogical or has major errors. (0-12 marks) Evaluation (20 marks) Evaluation is highly relevant to the assignment requirements and presented clearly and logically. Very strong link made between theory and practice. (18-20 marks) Evaluation is relevant to the assignment requirements but is not always presented clearly and / or logically. Strong link made between theory and practice. (14-16 marks) Evaluation is somewhat relevant to the assignment requirements. At times, the analysis is not clearly or logically presented. Fair link made between theory and practice. (10-12 marks) Evaluation is not relevant to the assignment requirements. Analysis is vague and illogical. The link between theory and practice is unclear and illogical or has major errors. (0-8 marks) Conclusion (5 marks) Conclusion is clearly stated and connections to the arguments and positions are clear and relevant. The underlying logic is explicit. (5 marks) Conclusion is clearly stated but connections to arguments and positions are not always clear and relevant – some aspects may not be connected or minor errors in the underlying logic are present. (4 marks) Conclusion is fairly well stated and connections to arguments and positions are somewhat unclear / irrelevant (3 marks). Conclusion is very poorly stated and the connections to the arguments and positions are incorrect, unclear, irrelevant or presented without explanation. Underlying logic has major errors. (0-2 marks) Writing (5 marks) The Project is coherently organized and easy to follow. There are no spellings or grammatical errors and technical terms are clearly defined. (5 marks) The Project is generally well organized and mostly easy to follow. There are only a few minor spelling and/or grammatical errors, and technical terms are not clearly defined. (4 marks) The Project is fairly well organized and somewhat easy to follow. There are a few minor spelling and / or grammatical errors and technical terms are not defined. (3 mark) The Project is poorly organized and difficult to read – does not flow logically from one part to another. It is not easy to follow. There are several spelling and/or grammatical errors; technical terms are not defined or are poorly defined. (0-2 marks) Referencing (5 marks) Four or more references were used/ cited. References were: 1. Appropriate for the context of the Project. 2. Were very current where applicable using references produced during the last 5 years 3. Used effectively in the Project. 4. Written using the latest APA style format (5 marks) Three references were used/ cited. References were: 1. Mostly appropriate for the context of the Project. 2. We’re not always current, using references produced during the last 6 years 3. Used mostly effectively in the Project. 4. Written using the latest APA style format for the most part (4 marks) Two references were used/ cited References were: 1. Somewhat appropriate for the context of the Project 2. Were for the most part, outdated, using references produced during the last 7 years 3. Used somewhat effectively in the Project. 4. Written using the latest APA style format was inconsistent throughout (3 marks) Only one reference or no references were used/ cited. References, if used were: 1. Not appropriate for the context of Project. 2. Were for the most part, outdated, using references produced during the last 8 years or more 3. Ineffectively used in the Project. 4. Not written using the Latest APA style. (0-2 marks)

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