Exam 9: Derivatives: Futures, Options, and Swaps

Explain how an interest rate futures contract differs from an outright purchase of a bond.

An individual who neither uses nor produces a commodity but buys a futures contract for the asset is:

How did CDS' contribute to the financial crisis of 2007-2009?

Speculators differ from hedgers in the sense that:

At expiration, the value of an option:

The user of a commodity who is trying to insure against the price of the commodity rising would:

If we have a stock selling for $95.00 and a call option for this stock has a strike price of $82.00 and an option price of $13.60:

Users of commodities are:

If the price of an underlying asset has a standard deviation of zero:

With a call option, the option holder:

The short position in a futures contract is the party that will:

The value of a derivative is determined by:

Someone who purchases a call option is really buying insurance to protect against:

With a futures contract:

Identify four factors that will cause the value of put options to decrease.

The time value of the option should:

With a call option that is described as in the money:

A lender obtains funds from depositors by offering short-term interest rates on savings accounts. The lender uses these funds to make longer-term installment loans. Explain how the lender might make use of the futures market to hedge the risk taken.

The primary risk in swaps is that:

Tom buys a futures contract for U.S. Treasury bonds and on the settlement date the interest rate on U.S. Treasury bonds is higher than Tom expected. Tom will have: