WorksheetsCommodity Derivatives and Commodity Exchange – MCQs
Total questions: 30
Worksheet time: 15mins
Commodity derivatives are best defined as:
Physical commodities traded for immediate delivery
Financial instruments whose value is derived from underlying commodities
Government-issued securities
Currency exchange instruments
Which of the following was the earliest form of commodity derivative?
Options
Futures
Forwards
Swaps
The evolution of commodity derivatives primarily aimed to:
Increase government revenue
Reduce price risk and uncertainty
Eliminate intermediaries
Control inflation
Which of the following is NOT a type of derivative?
Futures
Options
Swaps
Debentures
A futures contract is characterized by:
Customized terms
Trading on organized exchanges
Absence of margin requirement
Immediate settlement
Options give the holder the:
Obligation to buy or sell
Right but not the obligation to buy or sell
Compulsion to settle physically
Right to cancel exchange rules
Which of the following commodities is commonly traded in derivatives markets?
Real estate
Gold
Shares
Bonds
Agricultural commodities traded in derivatives markets include:
Crude oil and natural gas
Gold and silver
Wheat and cotton
Currencies and interest rates
Pricing of commodity derivatives primarily depends on:
Political stability
Demand and supply of the underlying commodity
Government policies alone
Corporate profitability
Which pricing model is commonly used for derivatives valuation?
CAPM
Cost-of-carry model
Dividend discount model
Gordon growth model
The cost-of-carry includes:
Storage, insurance, and financing costs
Advertising expenses
Brokerage charges only
Tax liabilities
Hedgers in the derivatives market aim to:
Maximize speculative profits
Reduce price risk
Manipulate prices
Increase market volatility
Speculators participate in derivatives markets to:
Avoid risk completely
Earn profit from price fluctuations
Stabilize commodity prices
Regulate exchanges
Arbitrageurs make profits by:
Holding long-term positions
Exploiting price differences across markets
Avoiding spot markets
Increasing delivery risk
Which participant provides liquidity to the derivatives market?
Hedgers only
Regulators
Speculators
Government agencies
The economic importance of commodity derivatives markets includes:
Increase in black marketing
Price discovery
Reduction in agricultural output
Monopoly creation
Commodity derivatives help farmers by:
Eliminating intermediaries
Ensuring fixed future prices
Increasing taxation
Removing storage needs
A commodity exchange is an organization that:
Manufactures commodities
Facilitates trading in commodity contracts
Controls commodity production
Fixes commodity prices
Which is a major international commodity exchange?
NASDAQ
London Metal Exchange (LME)
New York Stock Exchange
Bombay Stock Exchange
Chicago Mercantile Exchange (CME) is known for trading in:
Equity shares only
Commodities and derivatives
Government bonds only
Insurance products
World-wide commodity exchanges primarily promote:
Informal trading
Organized and standardized trading
Barter system
Cash-only transactions
An electronic spot exchange enables:
Manual trading only
Online trading with immediate delivery
Long-term futures trading
Informal commodity dealings
Electronic spot exchanges improve:
Market opacity
Transaction delays
Transparency and efficiency
Price manipulation
Regulation of commodity markets is essential to:
Encourage speculation
Prevent unfair trade practices
Eliminate competition
Increase volatility
In India, commodity derivatives markets are regulated by:
RBI
SEBI
IRDAI
NABARD
One objective of regulating commodity markets is to:
Increase insider trading
Protect the interests of participants
Restrict market access
Encourage price manipulation
Which of the following is NOT an economic benefit of commodity derivatives?
Risk management
Price discovery
Market transparency
Inflation creation
Physical settlement in commodity derivatives refers to:
Cash payment only
Actual delivery of commodities
Cancellation of contracts
Government intervention
Margin requirements in derivatives trading are intended to:
Increase profits
Reduce default risk
Eliminate speculation
Encourage delivery
Commodity derivatives markets contribute to economic development by:
Discouraging production
Improving income stability for producers
Increasing market inefficiencies
Promoting unorganized trade
