Chapter 5 Derivatives Market

Which of the following is NOT a derivative

• Single Stock Futures (SSFs)

• Swap

• Crude Palm Oil

• Put Options

Derivatives are usually traded at

• Over-the-counter only

• The exchange and over-the-counter

• The exchange only

• Bursa Malaysia Derivatives Berhad

What kind of settlement usually applied if the investors are trading the derivatives for speculation purposes?

• Physical settlement

• Cash settlement

• Hedging

• Return

Which of the following is NOT a purpose for which derivatives may be used?

• Gain profit

• Minimize risk

• Hedging

• Security issuance

Which one is NOT true about speculation

• Low risk

• To gain profit

• cash settlement

• To manage risk

Derivatives help to manage possible future risks especially against the fluctuation of price risk. This is

• Speculation

• Arbitraging

• Hedging

• None is correct

A call option is a right to

• force another party to buy the underlying security.

• repurchase a previously sold underlying security.

• sell the underlying security.

• buy the underlying security.

Forwards are _____.

• absolutely the same as futures.

• over-the-counter derivatives.

• exchange-traded derivatives.

• standardized like futures.

Financial derivatives include ___________.

• Option

• Swap

• Futures

• All of the above

What is the difference between options and futures?

• Futures are about obligations of both parties that they will have to fulfill in the future, whereas options are about obligations of both parties that they have to fulfill at present

• Futures are about rights of both parties, not about obligations, whereas options are about obligations of both parties only

• There is no difference. Futures and options are similar contracts in nature.

• None is correct