Exam 11: Forward and Futures Hedging, Spread, and Target Strategies

Suppose you buy an asset at $70 and sell a futures contract at $72.What is your profit if,prior to expiration,you sell the asset at $75 and the futures price is $78?

(Multiple Choice)

5.0/5

(38)

Question 21

The duration of the futures contract used in the price sensitivity hedge ratio is

(Multiple Choice)

4.8/5

(41)

Question 22

If you plan to issue a liability in the future,you are currently short in the spot market.

(True/False)

4.7/5

(33)

Question 23

A short hedge is one in which

(Multiple Choice)

4.7/5

(31)

Question 24

The basis is the ratio of the futures price to the spot price.

(True/False)

4.8/5

(32)

Question 25

You hold a bond portfolio worth $10 million and a modified duration of 8.5.What futures transaction would you do to raise the duration to 10 if the futures price is $93,000 and its implied modified duration is 9.25? Round up to the nearest whole contract.

(Multiple Choice)

4.9/5

(31)

Question 26

Which of the following measures is used in the price sensitivity hedge ratio for bond futures?

(Multiple Choice)

4.9/5

(35)

Question 27

The price sensitivity hedge ratio would be more appropriate for interest rate futures hedges than for commodity futures hedges.

(True/False)

4.8/5

(34)

Question 28

Which of the following statements about the use of futures in tactical asset allocation is correct?

(Multiple Choice)

4.8/5

(38)

Question 29

An individual who plans to take a foreign vacation could hedge the risk of converting into the foreign currency by selling foreign currency futures.

(True/False)

4.9/5

(38)

Question 30

Which of the following correctly expresses the profit on a hedge?

(Multiple Choice)

4.8/5

(36)

Question 31

The liquidity of the futures contract used in a hedge is very important to the hedger.

(True/False)

4.9/5

(30)

Question 32

A hedger should select a contract that expires the same month as the date on which the hedge is terminated.

(True/False)

5.0/5

(39)

Question 33

A short hedger wants the basis to strengthen.

(True/False)

4.8/5

(43)

Question 34

In which of the following situations would you use a short hedge?

(Multiple Choice)

4.8/5

(35)

Question 35

The relationship between the spot yield and the yield implied by the futures price is called

(Multiple Choice)

4.9/5

(29)

Question 36

A hedge reduces risk because the futures price is less volatile than the spot price.

(True/False)

4.8/5

(36)

Question 37

The risk of the basis is usually less than the risk of the spot position.

(True/False)

4.9/5

(34)

Question 38

Since it states that systematic risk cannot be eliminated,modern portfolio theory does not allow for stock index futures contracts.

(True/False)

4.9/5

(43)

Question 39

When a hedge is said to be a short hedge or a long hedge,it means that the position is short or long in futures.

(True/False)

4.8/5

(25)

Question 40

Showing 21 - 40 of 50

Suppose you buy an asset at $70 and sell a futures contract at $72.What is your profit if,prior to expiration,you sell the asset at $75 and the futures price is $78?

The duration of the futures contract used in the price sensitivity hedge ratio is

If you plan to issue a liability in the future,you are currently short in the spot market.

A short hedge is one in which

The basis is the ratio of the futures price to the spot price.

You hold a bond portfolio worth $10 million and a modified duration of 8.5.What futures transaction would you do to raise the duration to 10 if the futures price is $93,000 and its implied modified duration is 9.25? Round up to the nearest whole contract.

Which of the following measures is used in the price sensitivity hedge ratio for bond futures?

The price sensitivity hedge ratio would be more appropriate for interest rate futures hedges than for commodity futures hedges.

Which of the following statements about the use of futures in tactical asset allocation is correct?

An individual who plans to take a foreign vacation could hedge the risk of converting into the foreign currency by selling foreign currency futures.

Which of the following correctly expresses the profit on a hedge?

The liquidity of the futures contract used in a hedge is very important to the hedger.

A hedger should select a contract that expires the same month as the date on which the hedge is terminated.

A short hedger wants the basis to strengthen.

In which of the following situations would you use a short hedge?

The relationship between the spot yield and the yield implied by the futures price is called

A hedge reduces risk because the futures price is less volatile than the spot price.

The risk of the basis is usually less than the risk of the spot position.

Since it states that systematic risk cannot be eliminated,modern portfolio theory does not allow for stock index futures contracts.

When a hedge is said to be a short hedge or a long hedge,it means that the position is short or long in futures.

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

Swaps

Interest Rate Forwards and Options

Advanced Derivatives and Strategies

Financial Risk Management Techniques and Applications

Managing Risk in an Organization

Filters