WorksheetsDerivatives questions
Total questions: 11
Worksheet time: 6mins
Compared with exchange-traded derivatives, over-the-counter derivatives would most likely be described as:
Standardized.
Less transparent.
More transparent.
Exchange-traded derivatives are:
largely unregulated.
traded through an informal network.
guaranteed by a clearinghouse against default.
Which of the following derivatives is classified as a contingent claim?
Futures contracts
Interest rate swaps
Credit default swaps
In contrast to contingent claims, forward commitments provide the:
right to buy or sell the underlying asset in the future.
obligation to buy or sell the underlying asset in the future.
promise to provide credit protection in the event of default.
Which of the following derivatives provide payoffs that are non-linearly related to the payoffs of the underlying?
Options
Forwards
Interest-rate swaps
An interest rate swap is a derivative contract in which:
two parties agree to exchange a series of cash flows.
the credit seller provides protection to the credit buyer.
the buyer has the right to purchase the underlying from the seller.
Forward commitments subject to default are:
forwards and futures.
futures and interest rate swaps.
interest rate swaps and forwards.
Which of the following derivatives is least likely to have a value of zero at initiation of the contract?
Futures
Options
Forwards
A credit derivative is a derivative contract in which the:
clearinghouse provides a credit guarantee to both the buyer and the seller.
seller provides protection to the buyer against the credit risk of a third party.
the buyer and seller provide a performance bond at initiation of the contract.
Compared with the underlying spot market, derivative markets are more likely to have
greater liquidity.
higher transaction costs.
higher capital requirements.
A derivative is best described as a financial instrument that derives its performance by
Passing through the returns of the underlying.
Replicating the performance of the underlying.
Transforming the performance of the underlying.
