Author Question: Compare the rights and obligations of buyers and sellers of futures contracts with the rights of ... (Read 110 times)

wrbasek0

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Compare the rights and obligations of buyers and sellers of futures contracts with the rights of buyers and sellers of options contracts.
 
  What will be an ideal response?

Question 2

How might long policy lags impact the divine coincidence?
 
  What will be an ideal response?



wergv

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Answer to Question 1

Buyers and sellers of futures contracts have symmetric rights. Buyers and sellers of options contracts have asymmetric rights. Options represent the right to buy or sell the underlying asset. This means that buyers have rights, but sellers have obligations.

Answer to Question 2

The divine coincidence applies when policy makers are able to respond to a single shock at a time. If shocks occur at a faster pace than policies can be implemented, then policies may be destabilizing. The argument that the economy's self-correcting mechanism is too slow cannot justify policies that, in practice, are even slower.



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