Question 1

A chooser option permits you to choose the exercise price at a later date before expiration.

Accepted Answer

A) True 
 B)False  False

Question 2

In practice portfolio insurance strategies are usually executed using put options.

Accepted Answer

A) True 
 B)False  False

Question 3

If the S&P 500 ends up at 401,determine the upside capture.

Accepted Answer

A) 96.7 percent 
B) 96 percent 
C) 99.3 percent 
D) 94 percent 
E) 100 percent 
A) 96.7 percent 
B) 96 percent 
C) 99.3 percent 
D) 94 percent 
E) 100 percent A

Question 4

If you buy an asset-or-nothing option and a cash-or-nothing option,you hold the equivalent of an ordinary European option.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a type of structured note?

Accepted Answer

A) range floater 
B) inverse floater 
C) diff floater 
D) reverse floater 
E) none of the above 
A) range floater 
B) inverse floater 
C) diff floater 
D) reverse floater 
E) none of the above

Question 6

Barrier options either begin or end when the stock hits a certain price.

Accepted Answer

A) True 
 B)False

Question 7

A constant maturity swap has which of the following characteristics

Accepted Answer

A) the swap maturity is held constant at a fixed number of years 
B) the floating payment is usually based on the rate on a Treasury note 
C) the swap calls for all payments to be made at its maturity 
D) the floating payment and the maturity are both constant 
E) none of the above 
A) the swap maturity is held constant at a fixed number of years 
B) the floating payment is usually based on the rate on a Treasury note 
C) the swap calls for all payments to be made at its maturity 
D) the floating payment and the maturity are both constant 
E) none of the above

Question 8

Which of the following is a path-independent option

Accepted Answer

A) a fixed strike Asian call option 
B) a standard European call option 
C) an up-and-out call option 
D) an American put option 
A) a fixed strike Asian call option 
B) a standard European call option 
C) an up-and-out call option 
D) an American put option

Question 9

A contingent-pay option allows the holder to decide at expiration if he or she wants to pay for it.

Accepted Answer

A) True 
 B)False

Question 10

An option to buy an option is called a compound option.

Accepted Answer

A) True 
 B)False

Question 11

A security that pays off the return from a combination of mortgages is called a

Accepted Answer

A) homeowners' equity claim 
B) mortgage portfolio 
C) mortgage option 
D) mortgage-backed security 
E) none of the above 
A) homeowners' equity claim 
B) mortgage portfolio 
C) mortgage option 
D) mortgage-backed security 
E) none of the above

Question 12

A contingent-pay option is replicated by which of the following combinations?

Accepted Answer

A) long an ordinary call and long an ordinary put 
B) long an ordinary call and short a cash-or-nothing call 
C) long an ordinary call and short an asset-or-nothing call 
D) long an ordinary call and long an equity forward 
E) long an ordinary call and long a risk-free bond 
A) long an ordinary call and long an ordinary put 
B) long an ordinary call and short a cash-or-nothing call 
C) long an ordinary call and short an asset-or-nothing call 
D) long an ordinary call and long an equity forward 
E) long an ordinary call and long a risk-free bond

Question 13

A PO is a security promising a stream of common stock dividend payments.

Accepted Answer

A) True 
 B)False

Question 14

A diff swap pays off in one currency based on the difference between two interest rates from different countries.

Accepted Answer

A) True 
 B)False

Question 15

Path-dependent options have payoffs that cannot be determined without examining exactly how the asset moved during the life of the option.

Accepted Answer

A) True 
 B)False

Question 16

If the insured portfolio were dynamically hedged with stock index futures,how many futures would be used? The call delta is 0.52 and the continuous risk-free rate is 5.48 percent.Each futures has a multiplier of 250 and a price of 777.30.

Accepted Answer

A) 60 
B) 64 
C) 30 
D) 32 
E) none of the above 
A) 60 
B) 64 
C) 30 
D) 32 
E) none of the above

Question 17

If the insured portfolio consisted entirely of calls and T-bills,how many would be used?

Accepted Answer

A) 19,143 calls and 124,176 T-bills 
B) 31,397 calls and 122,449 T-bills 
C) 933,238 calls and 2,547 T-bills 
D) 31,407 calls and 119,997 T-bills 
E) 32,468 calls and 32,468 T-bills 
A) 19,143 calls and 124,176 T-bills 
B) 31,397 calls and 122,449 T-bills 
C) 933,238 calls and 2,547 T-bills 
D) 31,407 calls and 119,997 T-bills 
E) 32,468 calls and 32,468 T-bills

Question 18

In a weather derivative,the number of days times the average temperature above 65 degrees Fahrenheit is called

Accepted Answer

A) temperature day count 
B) day-temps 
C) cooling degree days 
D) temp-days 
E) heating degree days 
A) temperature day count 
B) day-temps 
C) cooling degree days 
D) temp-days 
E) heating degree days

Question 19

A security that is sub-divided into securities called tranches is called a

Accepted Answer

A) principal-only strip 
B) asian lookback option 
C) range mortgage strip 
D) collateralized mortgage obligation 
E) none of the above 
A) principal-only strip 
B) asian lookback option 
C) range mortgage strip 
D) collateralized mortgage obligation 
E) none of the above

Question 20

One attractive feature of weather as the underlying in a derivative is that it is easily measurable.

Accepted Answer

A) True 
 B)False

A chooser option permits you to choose the exercise price at a later date before expiration.

In practice portfolio insurance strategies are usually executed using put options.

If the S&P 500 ends up at 401,determine the upside capture.

If you buy an asset-or-nothing option and a cash-or-nothing option,you hold the equivalent of an ordinary European option.

Which of the following is not a type of structured note?

Barrier options either begin or end when the stock hits a certain price.

A constant maturity swap has which of the following characteristics

Which of the following is a path-independent option

A contingent-pay option allows the holder to decide at expiration if he or she wants to pay for it.

An option to buy an option is called a compound option.

A security that pays off the return from a combination of mortgages is called a

A contingent-pay option is replicated by which of the following combinations?

A PO is a security promising a stream of common stock dividend payments.

A diff swap pays off in one currency based on the difference between two interest rates from different countries.

Path-dependent options have payoffs that cannot be determined without examining exactly how the asset moved during the life of the option.

If the insured portfolio were dynamically hedged with stock index futures,how many futures would be used? The call delta is 0.52 and the continuous risk-free rate is 5.48 percent.Each futures has a multiplier of 250 and a price of 777.30.

If the insured portfolio consisted entirely of calls and T-bills,how many would be used?

In a weather derivative,the number of days times the average temperature above 65 degrees Fahrenheit is called

A security that is sub-divided into securities called tranches is called a

One attractive feature of weather as the underlying in a derivative is that it is easily measurable.

Introduction

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

The 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

Financial Risk Management Techniques and Applications

Managing Risk in an Organization

Filters

Exam 14: Advanced Derivatives and Strategies

A chooser option permits you to choose the exercise price at a later date before expiration.

In practice portfolio insurance strategies are usually executed using put options.

If the S&P 500 ends up at 401,determine the upside capture.

If you buy an asset-or-nothing option and a cash-or-nothing option,you hold the equivalent of an ordinary European option.

Which of the following is not a type of structured note?

Barrier options either begin or end when the stock hits a certain price.

A constant maturity swap has which of the following characteristics

Which of the following is a path-independent option

A contingent-pay option allows the holder to decide at expiration if he or she wants to pay for it.

An option to buy an option is called a compound option.

A security that pays off the return from a combination of mortgages is called a

A contingent-pay option is replicated by which of the following combinations?

A PO is a security promising a stream of common stock dividend payments.

A diff swap pays off in one currency based on the difference between two interest rates from different countries.

Path-dependent options have payoffs that cannot be determined without examining exactly how the asset moved during the life of the option.

If the insured portfolio were dynamically hedged with stock index futures,how many futures would be used? The call delta is 0.52 and the continuous risk-free rate is 5.48 percent.Each futures has a multiplier of 250 and a price of 777.30.

If the insured portfolio consisted entirely of calls and T-bills,how many would be used?

In a weather derivative,the number of days times the average temperature above 65 degrees Fahrenheit is called

A security that is sub-divided into securities called tranches is called a

One attractive feature of weather as the underlying in a derivative is that it is easily measurable.

Introduction

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

The 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

Financial Risk Management Techniques and Applications

Managing Risk in an Organization

Filters