Derivatives markets

An agreement between a buyer and seller to immediately exchange a specific for payment of cash is an example of?

• Forward contract

• Spot contract

• Futures contract

• Options contract

Which entity takes counterparty risk in a future contract?

• The exchange upon which the contract are traded

• The seller of the contract

• The buyer of the contract

• SEBI

An option that can only be exercised at maturity is called a?

• Swap

• Stock option

• European option

• American option

Which is an example of exchanges traded derivatives?

• Forward

• Futures

• Option

• Swaps

• B and C both

Forward contracts are risky because they?

• Are subject to lack of liquidity

• Are subject to default risk

• Hedge a portfolio

• Both A and B are true

Financial derivatives can be used by financial institute's to manage?

• Credit risk

• Intrest rate risk

• Liquidity risk

• Foreign exchange risk

• Both A, B and D only

The potential loss to a long position is limited to the permium paid?

• True

• False

Which of the following does the most reduce default risk for futures contracts

• Credit checks for both buyers and sellers

• High liquidity

• Flexible delivery arrangements

• Marking to market

An option that can be exercised profitably for the holder is said to be

• In the money

• Out of the money

• A tax liability

• A speculative bet

Financial derivatives include

• Stocks

• Bonds

• Futures

• None of the above