WorksheetsDerivative Markets Quiz
Total questions: 10
Worksheet time: 30mins
Which of the following is a characteristic of both a forward contract and a contingent claim?
The derivative contract has a positive value at contract initiation
The payoff of the derivative contract is dependent on the payoff of an underlying asset
Each party of the derivative contract is required to engage in a transaction at a later point in time
As compared to exchange-traded derivative markets, over-the-counter derivative markets are typically more:
liquid.
flexible.
transparent.
In a credit default swap, the party that receives a series of cash payments in return for promising to pay compensation for credit losses resulting from a third party’s default is most likely the:
clearinghouse.
seller of the swap.
buyer of the swap.
An investor makes the following statements: Which of the statements is correct? Statement 1: swaps are contingent claim. Statement 2: swaps are characterized by a series of cash flows.
Statement 1 only
Statement 2 only
Both Statement 1 and Statement 2
Consider a put option selling for $4 in which the exercise price is $58. What is the profit for a put buyer if the price of the underlying at expiration is $57?
–$3
$1
$3
An investor buys a call for $24.70 that has a strike price of $650. If the payoff at expiration for this call is $47.60, the price of the underlying at expiration is closest to:
$602.40.
$672.90.
$697.60.
A put option has a strike price of $20.50. The option premium is $1.00. If the price of the underlying at expiration is $21.50, the put option is:
in the money.
at the money.
out of the money.
In contrast to a contingent claim, a forward commitment creates counterparty risk for:
the long position only.
the short position only.
both the long and the short positions.
At maturity, the buyer faces the counterparty credit risk of the seller in:
a profitable long forward position only.
an in-the-money long call option position only.
both a profitable long forward position and an in-the-money long call option position.
A transaction setup to absorb the variable cash flow of a floating-rate asset can be described as a:
fair value hedge.
cash flow hedge.
net investment hedge.
