What role does the exchange play in an exchange-traded market?

Acts as an intermediary to reduce default risk

What is a forward contract?

An agreement to buy or sell an asset at a future date for a certain price

A contract settled daily on exchange

An agreement made on a stock exchange

Which type of trader takes a long position?

The one who buys the asset at a future date

The one who delivers the asset immediately

The one who cancels the contract

Where are forward contracts generally traded?

In centralized digital platforms

Which statement is true about futures contracts?

They are marked to market daily

They are always held to maturity

Futures contracts are typically:

Standardized and exchange-traded

What is a swap contract?

An exchange of cash flows on future dates

A right to buy or sell an asset

What role do market makers play in swaps?

They create and take positions in swaps for profit

They match companies at the same time

They guarantee settlement of swaps

What does an option give the holder?

The right, but not the obligation, to buy/sell

Which of the following is true about American options?

They can be exercised any time before expiry

They can only be exercised at maturity

What is the key difference between a forward and a spot contract?

Spot contracts involve immediate delivery, forward contracts settle in the future

Spot contracts are customizable, forwards are not

Forward contracts are settled immediately

Forward contracts are more flexible

Which best describes a forward contract?

Agreement between parties to buy/sell at a future date for a specified price

Traded on an exchange with daily settlement

Standardized contracts settled before maturity

A right, but not obligation, to buy in future

Who holds the long position in a forward or futures contract?

The party agreeing to buy the asset in future

The party agreeing to sell the asset

Which of the following is true for futures contracts?

Daily settlement based on market price (marked to market)

Contracts are customized between parties

What does "marked to market" mean in futures contracts?

Repricing daily based on market value

Paying a penalty for early exit

Being quoted in multiple currencies

Which of the following is true for swaps?

Agreement to exchange cash flows over time

Why do large financial institutions act as swap market makers?

To match buyers and sellers and profit from interest spread

What does an option contract provide?

A right to buy/sell an asset at a set price by a set date

An obligation to buy/sell an asset

Guaranteed profit based on asset price

What is a call option?

The right to buy an asset at a specified price before expiration

The right to sell an asset at a specific price

An agreement for interest exchange

What is a put option?

The right to sell an asset at a specific strike price

The right to buy an asset at any price

An agreement to receive dividends

In options terminology, what is the spot price?

The current market price of the asset

The strike price agreed in the contract

What does the exercise/strike price refer to in options?

The price at which the option can be exercised

The premium paid to enter the contract

The price of the underlying in a forward

What is the premium in an option contract?

The fee paid by the buyer for the right to exercise

The difference between strike and spot price

Which is a major difference between options and forwards/futures?

Options give rights with no obligation, unlike forwards/futures

Options are obligations; forwards/futures are rights

Forwards settle daily; options do not

Simultaneous transactions in multiple markets to earn riskless profit

Taking risky positions in one market

Avoiding exposure to any financial market

Buying and holding long-term investments

Market makers in derivatives:

Provide liquidity by taking positions without offsetting contracts

Only trade on behalf of clients

Which of the following is NOT a purpose of derivatives trading?

Transforming liabilities to assets

The formula Rc = m × ln(1 + Rm/m) is used to:

Convert discrete rate to continuous rate

Convert simple to compound interest

Convert annual to daily compounding

CCPS C123

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102 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is Initial Margin in a futures contract?

Extra amount after a loss

The amount needed to initiate a position

Money kept to avoid default

Extra profit withdrawn

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a derivative?

A stock

A bond

A financial instrument whose value depends on other assets

A bank account

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is an example of an underlying variable?

Software

Gold

Lebron JAMES

Vehicles

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is a financial asset?

Electricity

Oil

Bonds

Weather

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of these is NOT a type of derivative?

Futures

Options

Swaps

Insurance

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following derivatives are traded in the exchange-traded market?

Swaps and Forwards

Futures and Options

Options and Swaps

Forwards and Futures

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What defines the exchange-traded market?

No centralized trading facility

Terms set by counterparties

Standardized contracts defined by the exchange

Decentralized system

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CCPS C123

What is Initial Margin in a futures contract?

What is a derivative?

Which of the following is an example of an underlying variable?

Which of the following is a financial asset?

Which of these is NOT a type of derivative?

Which of the following derivatives are traded in the exchange-traded market?

What defines the exchange-traded market?

Which of the following is a characteristic of the OTC market?

What role does the exchange play in an exchange-traded market?

Which exchange was established in 1848?

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