Question 1

Lower transaction costs are one advantage of derivative markets.

Accepted Answer

A) True 
 B)False  True

Question 2

The market value of the derivatives contracts worldwide totals

Accepted Answer

A)  less than a trillion dollars 
B)  in the hundreds of trillion dollars 
C)  over a trillion dollars but less than a hundred trillion 
D)  over quadrillion dollars 
E)  none of the above 
A)  less than a trillion dollars 
B)  in the hundreds of trillion dollars 
C)  over a trillion dollars but less than a hundred trillion 
D)  over quadrillion dollars 
E)  none of the above C

Question 3

Derivative markets make stock and bond markets more efficient.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following markets is/are said to provide price discovery?

Accepted Answer

A)  futures 
B)  forwards 
C)  options 
D)  a and b 
E)  b and c 
A)  futures 
B)  forwards 
C)  options 
D)  a and b 
E)  b and c

Question 5

The positive relationship between risk and return is called

Accepted Answer

A)  expected return 
B)  market efficiency 
C)  the law of one price 
D)  arbitrage 
E)  none of the above 
A)  expected return 
B)  market efficiency 
C)  the law of one price 
D)  arbitrage 
E)  none of the above

Question 6

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Accepted Answer

A)  call 
B)  futures 
C)  cap 
D)  put 
E)  swaption 
A)  call 
B)  futures 
C)  cap 
D)  put 
E)  swaption

Question 7

Exchange-traded derivatives volume is less than one billion according to the Futures Industry magazine in 2010.

Accepted Answer

A) True 
 B)False

Question 8

Options on futures are also known as

Accepted Answer

A)  spot options 
B)  commodity options 
C)  exchange options 
D)  security options 
E)  none of the above 
A)  spot options 
B)  commodity options 
C)  exchange options 
D)  security options 
E)  none of the above

Question 9

Storing an asset entails risk.

Accepted Answer

A) True 
 B)False

Question 10

Hybrid derivatives involve either bonds or stocks.

Accepted Answer

A) True 
 B)False

Question 11

Most derivative contracts terminate with delivery of the underlying asset.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following are advantages of derivatives?

Accepted Answer

A)  lower transaction costs than securities and commodities 
B)  reveal information about expected prices and volatility 
C)  help control risk 
D)  make spot prices stay closer to their true values 
E)  all of the above 
A)  lower transaction costs than securities and commodities 
B)  reveal information about expected prices and volatility 
C)  help control risk 
D)  make spot prices stay closer to their true values 
E)  all of the above

Question 13

A seller of a put option on a futures contract obligates them to buy a futures contract should the put buyer exercise the option.

Accepted Answer

A) True 
 B)False

Question 14

Speculation is equivalent to gambling.

Accepted Answer

A) True 
 B)False

Question 15

A market in which the price equals the true economic value

Accepted Answer

A)  is risk-free 
B)  has high expected returns 
C)  is organized 
D)  is efficient 
E)  all of the above 
A)  is risk-free 
B)  has high expected returns 
C)  is organized 
D)  is efficient 
E)  all of the above

Question 16

The top ten derivatives exchanges have less than 50 percent of trading volume.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following trade on organized exchanges?

Accepted Answer

A)  caps 
B)  forwards 
C)  options 
D)  swaps 
E)  none of the above 
A)  caps 
B)  forwards 
C)  options 
D)  swaps 
E)  none of the above

Question 18

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

Accepted Answer

A) True 
 B)False

Question 19

The law of one price states that the price of an asset cannot change.

Accepted Answer

A) True 
 B)False

Question 20

The expected return minus the risk-free rate is called

Accepted Answer

A)  the risk premium 
B)  the percentage return 
C)  the asset's beta 
D)  the return premium 
E)  none of the above 
A)  the risk premium 
B)  the percentage return 
C)  the asset's beta 
D)  the return premium 
E)  none of the above

Lower transaction costs are one advantage of derivative markets.

The market value of the derivatives contracts worldwide totals

Derivative markets make stock and bond markets more efficient.

Which of the following markets is/are said to provide price discovery?

The positive relationship between risk and return is called

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Exchange-traded derivatives volume is less than one billion according to the Futures Industry magazine in 2010.

Options on futures are also known as

Storing an asset entails risk.

Hybrid derivatives involve either bonds or stocks.

Most derivative contracts terminate with delivery of the underlying asset.

Which of the following are advantages of derivatives?

A seller of a put option on a futures contract obligates them to buy a futures contract should the put buyer exercise the option.

Speculation is equivalent to gambling.

A market in which the price equals the true economic value

The top ten derivatives exchanges have less than 50 percent of trading volume.

Which of the following trade on organized exchanges?

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

The law of one price states that the price of an asset cannot change.

The expected return minus the risk-free rate is called

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: The Binomial Model

Option Pricing Models: The Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Managing Risk in an Organization

Filters

Exam 1: Introduction

Lower transaction costs are one advantage of derivative markets.

The market value of the derivatives contracts worldwide totals

Derivative markets make stock and bond markets more efficient.

Which of the following markets is/are said to provide price discovery?

The positive relationship between risk and return is called

Which of the following contracts obligates a buyer to buy or sell something at a later date?

Exchange-traded derivatives volume is less than one billion according to the Futures Industry magazine in 2010.

Options on futures are also known as

Storing an asset entails risk.

Hybrid derivatives involve either bonds or stocks.

Most derivative contracts terminate with delivery of the underlying asset.

Which of the following are advantages of derivatives?

A seller of a put option on a futures contract obligates them to buy a futures contract should the put buyer exercise the option.

Speculation is equivalent to gambling.

A market in which the price equals the true economic value

The top ten derivatives exchanges have less than 50 percent of trading volume.

Which of the following trade on organized exchanges?

Arbitrage is a transaction designed to capture profits resulting from market efficiency.

The law of one price states that the price of an asset cannot change.

The expected return minus the risk-free rate is called

Structure of Options Markets

Principles of Option Pricing

Option Pricing Models: The Binomial Model

Option Pricing Models: The Black-Scholes-Merton Model

Basic Option Strategies

Advanced Option Strategies

Structure of Forward and Futures Markets

Principles of Pricing Forwards, Futures and Options on Futures

Futures Arbitrage Strategies

Forward and Futures Hedging, Spread, and Target Strategies

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Appplications

Managing Risk in an Organization

Filters