Exam 7: Foreign Currency Derivatives: Futures and Options

The major difference between currency futures and forward contracts is that futures contracts are standardized for ease of trading on an exchange market whereas forward contracts are specialized and tailored to meet the needs of clients.

(True/False)

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Question 61

Traders by using the historical volatility assume that the immediate future will be the same as the recent past, and the historical volatility will equal the forward-looking volatility.

(True/False)

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Question 62

As an option moves further out-of-the-money, delta moves toward ________.

(Multiple Choice)

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Question 63

Which of the following is NOT a contract specification for currency futures trading on an organized exchange?

(Multiple Choice)

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Question 64

A call option whose exercise price is less than the spot price is said to be:

(Multiple Choice)

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Question 65

For a $1.50/£ call option with an initial premium of $0.033/£ and a rho value of 0.2, after an increase in the U.S. dollar rate from 8% to 9% - the new ATM option premium would be:

(Multiple Choice)

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Question 66

A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?

(Multiple Choice)

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Question 67

The time value is asymmetric in value as you move away from the strike price (i.e., the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

(True/False)

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Question 68

A foreign currency option gives the holder the right to a foreign currency, whereas a foreign currency option gives the holder the right to an option.

(Multiple Choice)

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Question 69

Historical volatility is the correct method for the calculation of the option volatility.

(True/False)

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Question 70

Option volatility is defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate.

(True/False)

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Question 71

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.

(Multiple Choice)

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Question 72

Which of the following is NOT a factor in determining the premium price of a currency option?

(Multiple Choice)

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Question 73

Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts.

(True/False)

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Question 74

The buyer of a long call option:

(Multiple Choice)

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Question 75

The expected change in the option premium from a small change in the domestic interest rate (home currency) is term rho.

(True/False)

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Question 76

As a general statement, it is safe to say that businesses generally use the for foreign currency option contracts, and individuals and financial institutions typically use the .

(Multiple Choice)

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Question 77

Currency futures contracts have become standard fare and trade readily in the world money centers.

(True/False)

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Question 78

Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation?

(Multiple Choice)

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Question 79

Foreign currency options are available both over-the-counter and on organized exchanges.

(True/False)

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Question 80

Showing 61 - 80 of 88

The major difference between currency futures and forward contracts is that futures contracts are standardized for ease of trading on an exchange market whereas forward contracts are specialized and tailored to meet the needs of clients.

Traders by using the historical volatility assume that the immediate future will be the same as the recent past, and the historical volatility will equal the forward-looking volatility.

As an option moves further out-of-the-money, delta moves toward ________.

Which of the following is NOT a contract specification for currency futures trading on an organized exchange?

A call option whose exercise price is less than the spot price is said to be:

For a $1.50/£ call option with an initial premium of $0.033/£ and a rho value of 0.2, after an increase in the U.S. dollar rate from 8% to 9% - the new ATM option premium would be:

A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?

The time value is asymmetric in value as you move away from the strike price (i.e., the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

A foreign currency option gives the holder the right to a foreign currency, whereas a foreign currency option gives the holder the right to an option.

Historical volatility is the correct method for the calculation of the option volatility.

Option volatility is defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate.

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.

Which of the following is NOT a factor in determining the premium price of a currency option?

Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts.

The buyer of a long call option:

The expected change in the option premium from a small change in the domestic interest rate (home currency) is term rho.

As a general statement, it is safe to say that businesses generally use the for foreign currency option contracts, and individuals and financial institutions typically use the .

Currency futures contracts have become standard fare and trade readily in the world money centers.

Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation?

Foreign currency options are available both over-the-counter and on organized exchanges.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 7: Foreign Currency Derivatives: Futures and Options

The major difference between currency futures and forward contracts is that futures contracts are standardized for ease of trading on an exchange market whereas forward contracts are specialized and tailored to meet the needs of clients.

Traders by using the historical volatility assume that the immediate future will be the same as the recent past, and the historical volatility will equal the forward-looking volatility.

As an option moves further out-of-the-money, delta moves toward ________.

Which of the following is NOT a contract specification for currency futures trading on an organized exchange?

A call option whose exercise price is less than the spot price is said to be:

For a $1.50/£ call option with an initial premium of $0.033/£ and a rho value of 0.2, after an increase in the U.S. dollar rate from 8% to 9% - the new ATM option premium would be:

A call option on euros is written with a strike price of $1.30/euro. Which spot price maximizes your profit if you choose to exercise the option before maturity?

The time value is asymmetric in value as you move away from the strike price (i.e., the time value at two cents above the strike price is not necessarily the same as the time value two cents below the strike price).

A foreign currency ________ option gives the holder the right to ________ a foreign currency, whereas a foreign currency ________ option gives the holder the right to ________ an option.

Historical volatility is the correct method for the calculation of the option volatility.

Option volatility is defined as the square root of the standard deviation of daily percentage changes in the underlying exchange rate.

A/An ________ option can be exercised only on its expiration date, whereas a/an ________ option can be exercised anytime between the date of writing up to and including the exercise date.

Which of the following is NOT a factor in determining the premium price of a currency option?

Most option profits and losses are realized through taking actual delivery of the currency rather than offsetting contracts.

The buyer of a long call option:

The expected change in the option premium from a small change in the domestic interest rate (home currency) is term rho.

As a general statement, it is safe to say that businesses generally use the ________ for foreign currency option contracts, and individuals and financial institutions typically use the ________.

Currency futures contracts have become standard fare and trade readily in the world money centers.

Dash Brevenshure works for the currency trading unit of ING Bank in London. He speculates that in the coming months the dollar will rise sharply vs. the pound. What should Dash do to act on his speculation?

Foreign currency options are available both over-the-counter and on organized exchanges.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

Financial Goals and Corporate Governance

The Foreign Exchange Market

International Parity Conditions

Interest Risk and Swaps

Foreign Exchange Rate Determination and Intervention

Transaction Exposure

Translation Exposure

Operating Exposure

Global Cost and Availability of Capital

Funding the Multinational Firm

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

A foreign currency option gives the holder the right to a foreign currency, whereas a foreign currency option gives the holder the right to an option.

A/An option can be exercised only on its expiration date, whereas a/an option can be exercised anytime between the date of writing up to and including the exercise date.

As a general statement, it is safe to say that businesses generally use the for foreign currency option contracts, and individuals and financial institutions typically use the .