Professional Documents
Culture Documents
2 Futures
1. There are certain risks involved in hedging in the forward or futures
market. which of the following is true?
A. Futures contracts have no counterparty risk, only the risk of the
exchange while forward contracts carry the credit risk of the
counterparty.
B. Futures contracts have both mismatch risk and basis risk
C. Futures contracts have the risk of the exchange.
D. A and B only
2. Market participants preference for exchange traded instruments over
OTC instruments is due to ____
I.
More transparency in pricing
II.
Market liquidity
III.
Reduced credit risk
A. I only
B. II only
C. I and II
D. All of the above
3. For every financial future instruments, the delivery dates are ___
A. Standardized across all exchanges
B. Fixed and there is one delivery date per month
C. Designed and limited to an efficient number for a particular
exchange
D. Flexible and determined by the traders
4. Spot USD/CAD is trading at 0.990. given that 3 month US Interest rates
at 0.30% and 3 month Canadian interest rates at 1.2%. what should be
the 3 month outright rate for USD/CAD?
A. 0.9922
B. 0.9878
C. 0.9900
D. 0.9989
5. Where the yield curve is positive ,we would expect the T-bonds futures
price to be _____than the cash
A. Lower
B. Higher
C. Same
D. Not enough information provided
Chap.4 Options
9. There is positive relationship between the value of a call option and ____
I.
Interest rates
II.
Time to expiration of the call option
III.
IV.
10.Which
I.
II.
III.
IV.
I and II
I,II and III
I,III and IV
II,III and IV
11.Which of the following will increase the value of both a call and a put
option ?
A. Increase in the exercise price
B. Increase in volatility
C. Increase in interest rates
D. Decrease in time to maturity
12.Which of the following about zero cost options is/true ?
I.
Since the option is zero cost ,we can buy as much as possible to
take advantage of its zero cost structure without having to worry
about the risk associated with it
II.
Zero cost structures give as the unlimited profit but limited
losses
III.
Only certain for assets an you structure a zero cost option
strategy
IV.
This is the best form of strategy in the whole of options trading
and we should recommend all our clients to buy this structure
A. I and II
B. II and III
C. II,III and IV
D. None of the above
13.A trader buys a Nikkei 225 futures at 10000, a put struck at 9500
(premium is 200) and sells a call struck at 10500 (premium is 190, what
is the synthetic position created by the trader ?
A. Bull spread
B. Bear spread
C. Ratio put spread
D. Short call
16.A warrants is trading at $0.40. the exercise price is $0.80. the share
price is $2.40. what is its gearing?
A. 2x
B. 6x
C. 3x
D. 5x
17.Company As warrants is trading at $0.35, its exercise price is $0.50.
while the share price is $0.65. what is its intrinsic value?
A. $0.85
B. $0.15
C. $0.30
D. $1.00
18.The market price of company Bs common share is $0.50 while the
price of the warrant is a $3.50. Two warrants can be converted into one
common share. The warrant price is currently trading at $2. What is the
warrant premium ?
A. 10%
B. 50%
C. 57%
D. 100%
I only
II only
I and II only
All of the above
I.
II.
III.
I and II
I and III
II and III
All of the above
III.
A.
B.
C.
D.
D. I only
33.Market risk will impact:
A. The principal component of a structured product only
B. The return component of a structured product only
C. Both the principal and return component of a structured product
D. None of these
Counterparty risk
Exchange risk
Clearing broker risk
A. I and II
B. I and III
C. II and III
D. All of the above
35.Option carry multiple risk parameters. Which of the following is true?
A. Theta risk does not measure the potential loss through time
decay
B. Rho risk is associated with volatility
C. Delta risk cannot be hedged
D. Vega is associated with volatility which is the major trading risk
in option
36.With DV01 of USD 10000 the position size of a 1 year instrument is
limited to USD 100 million ( I . e every basis point move would
generate USD 10000 profit or loss for the position). With the same DV01
of $USD10000 the size of a 5 year instrument will be limited to:
A. USD 100 million
B. USD 200 million
C. USD 50 million
D. USD 20 million
C. Options
D. All of the above
44.Which statements regarding CFDs and stock futures is INCORRECT?
A. CFDs have counterparty risk but stock futures do not
B. CFDs can be extended by the investor for as long as the investor
wishes but stock futures have a fixed maturity date
C. CFDs have implicit financing cost as part of its price and stock
futures financing cost is explicitly computed
D. CFDs are entitled to dividends and stock futures have no
dividends entitlements
45.Trading in a CFD in an international stock outside the investors home
country can give rise to:
A. Currency risk
B. Liquidity risk
C. Market risk
D. All of the above
46.An investor holding a CFD trading can use a stop loss order and :
I.
It will always be executed when the market stock price hits the
stop loss price.
II.
It may not always be executed in a volatile market as the stop
loss price may not be hit
III.
To ensure further safety the investor should use a guaranteed
stop loss as the order will be executed once the price is reached
The CFD margin requirement can be lower than a position without a
stop loss order
A.
B.
C.
D.
I and III
I,III and IV
II and III
II,III and IV
52.An investor enters into a long Es contracts for 1000 shares of company
A at $ 15/shares .The maintenance margin is 10% .after a weak, the
price of the share is $14. What is the investor s required margin?
A. $1400
B. $1500
C. $2000
D. $2400