Chapter 1

What is a futures contract?

• An agreement to buy or sell an asset immediately

• An agreement to buy or sell an asset at a certain time in the future for a certain price

• An agreement to buy or sell an asset at any time for any price

• An agreement to buy or sell an asset at a certain time in the past for a certain price

How are futures contracts traditionally traded?

• Through interdealer brokers only

• Through direct contact between buyers and sellers

• Through online platforms only

• Using the open outcry system where traders physically meet on the floor of the exchange

What role do banks often play in the derivatives markets?

• Market makers for commonly traded instruments

• Regulators overseeing all transactions

• Auditors ensuring compliance

• Legal advisors for contract disputes

What does it mean when banks act as market makers?

• They only trade in spot contracts

• They are not involved in the trading process

• They only trade with other banks

• They are always prepared to quote bid and offer prices for derivatives transactions

How do market participants in OTC derivatives markets find counterparties for their trades?

• Contact each other directly or use an interdealer broker

• Use the open outcry system on the exchange floor

• Use online trading platforms exclusively

• Trade only with banks