Exam 9: Derivatives: Futures, Options, and Swaps

Suppose you purchase a call option to purchase General Motors common stock at $80 per share in March. The current price of GM stock is $83 and the time value of the option is $5. What is the intrinsic value of the option? As the expiration date approaches, what will happen to the size of the time value of the option?

There's a call option written for 100 shares of GM stock for $85.00 a share, prior to the third Friday of October 2017: The option writer:

An arbitrageur is someone who:

For a given call option price, which of the following statements is correct?

One argument why farmers in poor countries remain poor is:

Assume we have a stock currently worth $100. We also assume the interest rate is zero, and we can buy options for this stock with a strike price of $100. If the stock can rise or fall by $20 with equal probability over the option period, and the option cannot be exercised until the expiration date, what is the time value of the option?

A call option described as at the money would find:

How does trading in over-the-counter markets increase systemic risk?

Comparing an option to a futures contract it would be correct to say:

A put option described as out of the money would find:

The process of marking to market:

A futures contract is a forward contract with some important differences. Explain.

Assume we have a stock currently worth $50. We also assume the interest rate is zero, and we can buy options for this stock with a strike price of $50. If the stock can rise or fall by $10 with equal probability over the option period, and the option cannot be exercised until the expiration date, what is the time value of the option?

Explain the concept of notional principal used in swaps.

Considering a put option, an increase in the strike price:

How can we link the lack of futures markets in poor countries to the fact that farmers in poor countries are likely to remain poor?

An option's value will never be less than zero because:

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

Considering interest-rate swaps, the swap spread is:

A baker of bread has a long-term fixed-price contract to supply bread. Which of the following would NOT reduce her risk?