Derivatives

A derivative is a financial contract whose value is derived from:

• Company profits

• Underlying assets

• Government regulations

• Interest paid by banks

Which of the following is an example of an underlying asset in Malaysia?

• CPO (Crude Palm Oil)

• MRT infrastructure

• Ringgit Savings Accounts

• Employee salaries

A forward contract is usually traded:

• On Bursa Malaysia Derivatives

• Over-the-counter (OTC)

• On the stock exchange

• In money markets

Which type of derivative gives the right but not the obligation to buy or sell?

• Swap

• Option

• Forward

• Futures

In Malaysia, which regulator ensures derivatives market stability?

• Bursa Malaysia Securities

• Securities Commission Malaysia (SC)

• Bank Negara Malaysia (BNM)

• Ministry of Finance

Why do companies like AirAsia use derivatives?

• To maximize daily profits

• To protect against rising fuel costs

• To expand international routes

• To avoid paying taxes

Which statement best explains the role of speculators in derivatives markets?

• They reduce exposure to risks.

• They provide liquidity by taking on risks for profit.

• They regulate exchanges.

• They provide free contracts to farmers.

Arbitrageurs are important in derivatives markets because they:

• Increase counterparty risks

• Exploit price differences across markets

• Speculate on future oil prices

• Regulate financial institutions

Which of the following best distinguishes forwards from futures?

• Forwards are standardized, while futures are customized.

• Futures are OTC, while forwards are exchange-traded.

• Forwards are private agreements, while futures are exchange-traded and standardized.

• Forwards require margin deposits, while futures never do.

Why do regulators like SC and BNM play a crucial role in derivatives markets?

• To promote excessive speculation

• To ensure stability and protect investors

• To remove all hedging activities

• To guarantee profits for corporations