Derivatives Trading Quiz

What are the two main ways that derivatives trade?

• Over the counter (OTC) or on an exchange

• For cash or on credit

• For long-term or short-term gain

• For short-term or long-term liability

What is the underlying asset of a futures contract?

• The stock of a company

• The price of a commodity

• The value of a currency

• All of the above

Which of the following is NOT a type of derivative?

• Futures contract

• Option contract

• Forward contract

• Stock

• Swap

What is the purpose of a derivative contract?

• To speculate on the future price of an asset

• To hedge against the risk of an adverse price movement in an asset

• Both A and B

• None of the above

What is the largest derivatives exchange in the world?

• The Chicago Mercantile Exchange (CME) Group.

• The Intercontinental Exchange (ICE).

• The Eurex Exchange.

• The Tokyo Commodity Exchange (TOCOM).

What is the difference between a forward contract and a futures contract?

• Forward contracts are traded on exchanges, while futures contracts are traded over-the-counter.

• Forward contracts are standardized, while futures contracts are customized.

• Forward contracts are settled in cash, while futures contracts are settled by delivery of the underlying asset.

• None of the above.

What is the most common underlying asset for derivatives contracts?

• Stocks

• Bonds

• Commodities

• Foreign currencies

What is a derivative contract?

• A financial contract whose value is derived from the value of another asset, such as a stock, bond, or commodity.

• A contract that gives the holder the right to buy or sell an asset at a predetermined price by a certain date.

• A contract that obligates the holder to buy or sell an asset at a predetermined price by a certain date.

• All of the above.

1. What are the four main types of derivative contracts?

• Futures, options, forwards, and swaps. 

  
  

• Calls, puts, straddles, and strangles. 

  
  

• European, American, exotic, and path-dependent options. 

  
  

•  Exchange-traded, over-the-counter, listed, and unlisted.

  
  

What is the concept of a derivative contract?

• A derivative contract is a government-issued bond that pays a fixed interest rate.

• A derivative contract is a legal document that outlines the terms and conditions of a loan.

• A derivative contract is a type of insurance policy that protects against financial losses.

• A derivative contract is a financial agreement between two parties that derives its value from an underlying asset.