Question 1

The probability of a regular put option closing in-the-money is, with our usual notation: choose one)

Accepted Answer

A)  Nd1) 
B)  Nd2) 
C)  N−d1) 
D)  N−d2) 
A)  Nd1) 
B)  Nd2) 
C)  N−d1) 
D)  N−d2) D

Question 2

As the barrier is observed more frequently, a knock-out option becomes: choose one)

Accepted Answer

A)  More valuable 
B)  Less valuable 
C)  There is no effect on value 
D)  May become more valuable or less valuable 
A)  More valuable 
B)  Less valuable 
C)  There is no effect on value 
D)  May become more valuable or less valuable B

Question 3

In a shout call option, the strike price is $30. The holder shouts when the asset price is $40. What is the payoff from the option if the final asset price is $35? choose one)

Accepted Answer

A)  $0 
B)  $5 
C)  $10 
D)  $15 
A)  $0 
B)  $5 
C)  $10 
D)  $15 C

Question 4

A PO is a 'principal only' MBS and an IO is an 'interest only' MBS. As prepayments increase, the following happens: choose one)

Accepted Answer

A)  Both the PO and IO become more valuable. 
B)  The PO becomes more valuable and the IO becomes less valuable. 
C)  The PO becomes less valuable and the IO becomes more valuable. 
D)  Both the PO and IO become less valuable. 
A)  Both the PO and IO become more valuable. 
B)  The PO becomes more valuable and the IO becomes less valuable. 
C)  The PO becomes less valuable and the IO becomes more valuable. 
D)  Both the PO and IO become less valuable.

Question 5

In a BBSW-in-arrears swap, the following is true: choose one)

Accepted Answer

A)  The floating payment made on a date is the BBSW rate on the previous payment date. 
B)  The floating payment on a date is the BBSW rate two payment dates ago. 
C)  The floating payment on a date is the BBSW rate on that date. 
D)  The floating payment on a date is the BBSW rate on that date only when it is higher than the BBSW rate on the previous payment date. 
A)  The floating payment made on a date is the BBSW rate on the previous payment date. 
B)  The floating payment on a date is the BBSW rate two payment dates ago. 
C)  The floating payment on a date is the BBSW rate on that date. 
D)  The floating payment on a date is the BBSW rate on that date only when it is higher than the BBSW rate on the previous payment date.

Question 6

A floating lookback put option pays off: choose one)

Accepted Answer

A)  The amount by which the final stock price exceeds the minimum stock price 
B)  The amount by which the maximum stock price exceeds the final stock price 
C)  The amount by which the strike price exceeds the minimum stock price 
D)  The amount by which the maximum stock price exceeds the strike price 
A)  The amount by which the final stock price exceeds the minimum stock price 
B)  The amount by which the maximum stock price exceeds the final stock price 
C)  The amount by which the strike price exceeds the minimum stock price 
D)  The amount by which the maximum stock price exceeds the strike price

Question 7

An Asian option is a term used to describe: choose one)

Accepted Answer

A)  An option where the payoff depends on whether a barrier is hit 
B)  An option where the payoff depends on the average value of a variable over a period of time 
C)  An option that trades on an exchange in the Far East 
D)  An option with a non-standard payoff 
A)  An option where the payoff depends on whether a barrier is hit 
B)  An option where the payoff depends on the average value of a variable over a period of time 
C)  An option that trades on an exchange in the Far East 
D)  An option with a non-standard payoff

Question 8

Which of the following would be referred to as an equity swap? choose one)

Accepted Answer

A)  An exchange of the return from an equity index for a fixed or floating rate of interest. 
B)  An exchange of a long position in one stock for a long position in another stock. 
C)  An exchange of a short position in one stock for a short position in another stock. 
D)  None of the above. 
A)  An exchange of the return from an equity index for a fixed or floating rate of interest. 
B)  An exchange of a long position in one stock for a long position in another stock. 
C)  An exchange of a short position in one stock for a short position in another stock. 
D)  None of the above.

Question 9

A five-year interest rate swap that can be cancelled at the two year point is: choose one)

Accepted Answer

A)  The difference between two plain vanilla interest rate swaps 
B)  The difference between a plain vanilla interest rate swap and a forward start swap 
C)  A regular interest rate swap plus a European swap option 
D)  A regular interest rate swap plus a Bermudan swap option 
A)  The difference between two plain vanilla interest rate swaps 
B)  The difference between a plain vanilla interest rate swap and a forward start swap 
C)  A regular interest rate swap plus a European swap option 
D)  A regular interest rate swap plus a Bermudan swap option

Question 10

There are two types of regular options calls and puts). How many types of compound options are there? choose one)

Accepted Answer

A)  Two 
B)  Four 
C)  Six 
D)  Eight 
A)  Two 
B)  Four 
C)  Six 
D)  Eight

The probability of a regular put option closing in-the-money is, with our usual notation: choose one)

As the barrier is observed more frequently, a knock-out option becomes: choose one)

In a shout call option, the strike price is $30. The holder shouts when the asset price is $40. What is the payoff from the option if the final asset price is $35? choose one)

A PO is a 'principal only' MBS and an IO is an 'interest only' MBS. As prepayments increase, the following happens: choose one)

In a BBSW-in-arrears swap, the following is true: choose one)

A floating lookback put option pays off: choose one)

An Asian option is a term used to describe: choose one)

Which of the following would be referred to as an equity swap? choose one)

A five-year interest rate swap that can be cancelled at the two year point is: choose one)

There are two types of regular options calls and puts). How many types of compound options are there? choose one)

Introduction

Mechanics of Futures Markets

Hedging Strategies Using Futures

Interest Rates

Determination of Forward and Futures Prices

Interest Rate Futures 7 Swaps

Swaps

Securitization and the Credit Crisis of 2007

Mechanics of Options Markets

Properties of Stock Options

Trading Strategies Involving Options

Introduction to Binomial Trees

Valuing Stock Options: the Black-Scholes-Merton Model

Employee Stock Options

Options on Stock Indices and Currencies

Futures Options

The Greek Letters

Binomial Trees in Practice

Volatility Smiles

Value at Risk

Interest Rate Options

Credit Derivatives

Weather, Energy and Insurance Derivatives

Filters

Exam 22: Exotic Options and Other Non-Standard Products

The probability of a regular put option closing in-the-money is, with our usual notation: choose one)

As the barrier is observed more frequently, a knock-out option becomes: choose one)

In a shout call option, the strike price is $30. The holder shouts when the asset price is $40. What is the payoff from the option if the final asset price is $35? choose one)

A PO is a 'principal only' MBS and an IO is an 'interest only' MBS. As prepayments increase, the following happens: choose one)

In a BBSW-in-arrears swap, the following is true: choose one)

A floating lookback put option pays off: choose one)

An Asian option is a term used to describe: choose one)

Which of the following would be referred to as an equity swap? choose one)

A five-year interest rate swap that can be cancelled at the two year point is: choose one)

There are two types of regular options calls and puts). How many types of compound options are there? choose one)

Introduction

Mechanics of Futures Markets

Hedging Strategies Using Futures

Interest Rates

Determination of Forward and Futures Prices

Interest Rate Futures 7 Swaps

Swaps

Securitization and the Credit Crisis of 2007

Mechanics of Options Markets

Properties of Stock Options

Trading Strategies Involving Options

Introduction to Binomial Trees

Valuing Stock Options: the Black-Scholes-Merton Model

Employee Stock Options

Options on Stock Indices and Currencies

Futures Options

The Greek Letters

Binomial Trees in Practice

Volatility Smiles

Value at Risk

Interest Rate Options

Credit Derivatives

Weather, Energy and Insurance Derivatives

Filters