WorksheetsChapter 5 Derivatives Market
Total questions: 25
Worksheet time: 2hrs 5mins
Which of the following is NOT a derivative
Single Stock Futures (SSFs)
Swap
Crude Palm Oil
Put Options
Derivatives are usually traded at
Over-the-counter only
The exchange and over-the-counter
The exchange only
Bursa Malaysia Derivatives Berhad
What kind of settlement usually applied if the investors are trading the derivatives for speculation purposes?
Physical settlement
Cash settlement
Hedging
Return
Which of the following is NOT a purpose for which derivatives may be used?
Gain profit
Minimize risk
Hedging
Security issuance
Which one is NOT true about speculation
Low risk
To gain profit
cash settlement
To manage risk
Derivatives help to manage possible future risks especially against the fluctuation of price risk. This is
Speculation
Arbitraging
Hedging
None is correct
A call option is a right to
force another party to buy the underlying security.
repurchase a previously sold underlying security.
sell the underlying security.
buy the underlying security.
Forwards are _____.
absolutely the same as futures.
over-the-counter derivatives.
exchange-traded derivatives.
standardized like futures.
Financial derivatives include ___________.
Option
Swap
Futures
All of the above
What is the difference between options and futures?
Futures are about obligations of both parties that they will have to fulfill in the future, whereas options are about obligations of both parties that they have to fulfill at present
Futures are about rights of both parties, not about obligations, whereas options are about obligations of both parties only
There is no difference. Futures and options are similar contracts in nature.
None is correct
What does "in the money" mean?
It is profitable
To have some amount of money at one's disposal
The promise to pay
None is correct
What will happen if a trader refuses to exercise an option?
He will have to pay a fine of a subtantial amount
He will not pay a penny
He will lose a fee which is usually not a subtantial amount of money
He will lose his reputation
What is a (Financial) Derivative?
A financial contract that gives the owner a way to manage against market risk.
A financial contract whose value is derived from the value of an underlying asset.
A financial contract whose payoff is depends on an event occurring.
A financial contract that gives the owner a way to manage against financial risks.
If you buy an option you are
Obligated to buy an asset at the agreed upon price on a specific date
Not obligated to buy an asset at the agreed upon price on a specific date.
When the buyer has the option to buy if he thinks a stock will go up in price it is called a
Call Option
Put Option
When the buyer has the option to sell if he thinks a stock will go down in price it is called a
Call Option
Put Option
Hedging is mechanism to gain a profit.
True
False
A futures contract is:
a nonnegotiable, nonmarketable instrument.
a security, like stocks and bonds.
a firm agreement by two parties to make or take delivery of an item sometime in the future.
not a legal contract, and therefore its terms can be changed during the life of the contract.
Is the price where the options contract are sold and bought
Margin
Premium
Strike price
Down payment
Which of the following commodities are NOT used as the underlying assets for derivatives contract in Malaysia
Tin
Gold
Corn
USD RBD Plam Olein
Grants an option buyer the right, but not the obligation, to sell an option seller a contract.
Call Options
Marginal Call
Put Options
Open Interest
In an options contract, the price at which the options holder can buy or sell the underlying asset is called
Premium
Strike price
Margin
Market price
What is European PUT Option
Gives the holder the obligation to sell underlying asset only at expiry date
Gives the holder the right to sell underlying asset only at expiry date
Gives the holder the right to sell underlying asset anytime before expiry date
Gives the holder the obligation to sell underlying asset anytime before expiry date
Contracts that are traded over-the-counter are
Standardized
Transparent
Customized
Requires margin account
Followings are the power given to the Securities Commissions regarding the derivatives market in Malaysia EXCEPT for
Ensure market integrity
Protect the welfare of the investors
Collecting margin payment
Regulate the industry
