Futures markets

What is currently the largest derivatives exchange worldwide (by number of contracts traded)?

• National Stock Exchange of India

• Shanghai Futures Exchange

• CME Group

• Nasdaq

The convenience yield reflects...

• ...the benefits received when holding the spot asset.

• ...the benefits received when holding the futures contract.

• ...the cost incurred when holding the futures contract.

• ...the cost incurred when holding the futures contract.

When the interest rate + fees are smaller than the average dividend yield...

• The futures price is smaller than the spot price

• The futures price increases with the time to maturity

• A shortage of the underlying commodity may be expected

• The cost of carrying is greater than the convenience yield

Which of the following is FALSE?

• In backwardation the futures price is lower than the spot price

• In backwardation the futures price decreases with the time to maturity T

• A downward-sloping futures term structure indicates that the price of the underlying asset will decrease

• The convenience yield is higher when shortages of the underlying assets are expected

The initial margin for your futures position is £7,000 and the maintenance margin is £3,500. If the balance in your margin account is £3,600, how much must you deposit? 

• 100

• 0

• 3400

• 3500

Which of the following is FALSE?

• In contango the cost of carrying is greater than the convenience yield

• The convenience yield is negligible when the supply of the underlying asset is expected to be high

• When investors expect increasing interest rates, the futures quote is higher

• In contango the futures price decreases with the time to maturity T

Which of the following is FALSE?

In futures markets...

• ...the open interest is equal to the number of open long positions. 

• ...the open interest is equal to the number of open short positions. 

• ...most contracts are closed out before maturity

• ...a long futures hedge is appropriate when you know you will sell an asset and want to lock in the price

Based on the cost of carry model, simulate the price for a futures contract on the FTSE100 index.

Average dividend yield, d = 3.72%

UK Interest rate (prime borrowing rate), i = 3%

^{Note: Assume that the interest rate and dividend yield do not vary over time.}

Spot price on 2 Dec 2022 = 6556.23

What is the price of the 6-month futures on the FTSE100 index?

Round your answer to the second decimal.