Question 1

A firm that expects to borrow in the future would use a short hedge to protect against interest rate changes.

Accepted Answer

A) True 
 B)False

Question 2

A hedge that is expected to earn a net profit is called an anticipatory hedge.

Accepted Answer

A) True 
 B)False

Question 3

Determine the optimal hedge ratio for Treasury bonds worth $1,000,000 with a modified duration of 12.45 if the futures contract has a price of $90,000 and a modified duration of 8.5 years.

Accepted Answer

A) 16.27 
B) 15.93 
C) 7.42 
D) 11.11 
E) none of the above 
A) 16.27 
B) 15.93 
C) 7.42 
D) 11.11 
E) none of the above

Question 4

A strengthening of the basis means

Accepted Answer

A) the spot price rises more than the futures price 
B) the futures price falls more than the spot price 
C) a short hedger benefits 
D) all of the above 
E) none of the above 
A) the spot price rises more than the futures price 
B) the futures price falls more than the spot price 
C) a short hedger benefits 
D) all of the above 
E) none of the above

Question 5

An investor who expects to purchase stock at a later date would use a short hedge to protect against stock price movements.

Accepted Answer

A) True 
 B)False

Question 6

Find the optimal stock index futures hedge ratio if the portfolio is worth $1,200,000,the beta is 1.15 and the S&P 500 futures price is 450.70 with a multiplier of 250.

Accepted Answer

A) 10.65 
B) 12.25 
C) 6123.80 
D) 5325.05 
E) none of the above 
A) 10.65 
B) 12.25 
C) 6123.80 
D) 5325.05 
E) none of the above

Question 7

Find the profit if the investor enters an intramarket spread transaction by selling a September futures at $4.5,buys an December futures at $7.5 and then reverses the September futures at $5.5 and the December futures at $9.5.

Accepted Answer

A) -3 
B) -2 
C) 2 
D) 1 
E) none of the above 
A) -3 
B) -2 
C) 2 
D) 1 
E) none of the above

Question 8

In the real-world,financial decisions are irrelevant,so there is really no reason for firms to hedge.

Accepted Answer

A) True 
 B)False

Question 9

The implied duration of a futures contract is the duration of the underlying bond measured as if one owned the bond today.

Accepted Answer

A) True 
 B)False

Question 10

A hedge that involves the use of a futures contract on an instrument that is different from the instrument being hedged is called a cross hedge.

Accepted Answer

A) True 
 B)False

A firm that expects to borrow in the future would use a short hedge to protect against interest rate changes.

A hedge that is expected to earn a net profit is called an anticipatory hedge.

Determine the optimal hedge ratio for Treasury bonds worth $1,000,000 with a modified duration of 12.45 if the futures contract has a price of $90,000 and a modified duration of 8.5 years.

A strengthening of the basis means

An investor who expects to purchase stock at a later date would use a short hedge to protect against stock price movements.

Find the optimal stock index futures hedge ratio if the portfolio is worth $1,200,000,the beta is 1.15 and the S&P 500 futures price is 450.70 with a multiplier of 250.

Find the profit if the investor enters an intramarket spread transaction by selling a September futures at $4.5,buys an December futures at $7.5 and then reverses the September futures at $5.5 and the December futures at $9.5.

In the real-world,financial decisions are irrelevant,so there is really no reason for firms to hedge.

The implied duration of a futures contract is the duration of the underlying bond measured as if one owned the bond today.

A hedge that involves the use of a futures contract on an instrument that is different from the instrument being hedged is called a cross hedge.

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

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

A firm that expects to borrow in the future would use a short hedge to protect against interest rate changes.

A hedge that is expected to earn a net profit is called an anticipatory hedge.

Determine the optimal hedge ratio for Treasury bonds worth $1,000,000 with a modified duration of 12.45 if the futures contract has a price of $90,000 and a modified duration of 8.5 years.

A strengthening of the basis means

An investor who expects to purchase stock at a later date would use a short hedge to protect against stock price movements.

Find the optimal stock index futures hedge ratio if the portfolio is worth $1,200,000,the beta is 1.15 and the S&P 500 futures price is 450.70 with a multiplier of 250.

Find the profit if the investor enters an intramarket spread transaction by selling a September futures at $4.5,buys an December futures at $7.5 and then reverses the September futures at $5.5 and the December futures at $9.5.

In the real-world,financial decisions are irrelevant,so there is really no reason for firms to hedge.

The implied duration of a futures contract is the duration of the underlying bond measured as if one owned the bond today.

A hedge that involves the use of a futures contract on an instrument that is different from the instrument being hedged is called a cross hedge.

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