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This set of Financial Derivatives and Risk Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Derivatives And Risk Management Set 1
Q1 | The payoffs for financial derivatives are linked to
- securitiesthat will be issued in the future
- the volatility of interest rates
- previously issued securities
- government regulations specifying allowable rates of return.
Q2 | Financial Derivativesinclude
- Stocks
- Bonds
- Futures
- None of these
Q3 | By hedging Portfolio a bank manager
- Reducesinterest rate risk
- Increases exchange rate risk
- Increases reinvestment risk
- Increase the probability of gains
Q4 | The markets in which derivatives are trade is known as
- Asset backed market
- Cash market
- Mortgage market
- Derivative market
Q5 | The contract where buyer and seller agrees to exchange asset on future date without the involvementof stock exchange
- Options
- Futures
- Forwards
- Swaps
Q6 | The contract which gives the buyer the right but not obligation
- Options
- Futures
- Swaps
- Forwards
Q7 | The buyer in the derivative contract is also known as
- Deep in the contract
- Middle in the contract
- Short in the contract
- Long in the contract
Q8 | ETD stands for
- Electronic traded serivatives
- Equity traded derivatives
- Exchange traded derivatives
- Estimated trade delay
Q9 | Market players who take benefits from difference in market prices are called
- Speculators
- Arbitrageurs
- Hedgers
- Spreaders
Q10 | Short in derivative contract implies
- Middle man
- Buyer
- Seller
- Stock exchange
Q11 | Which of the following is potentially obligated to sell an asset at a predetermined price
- Put writer
- A call writer
- A put buyer
- A call buyer
Q12 | Which of the following contract is non standardised and suffers illiquidity most
- Swaps
- Forwards
- Options
- Futures
Q13 | The initial amount paid by option buyer at the time of entering the contract
- Option margin
- Option premium
- Option money
- Option title
Q14 | The difference between strike price and current market price of underlying security in optioncontract is
- Time value
- Intrinsic value
- Exchange value
- Trade value
Q15 | The option contract which gives the buyer the right to buy the underlying asset is
- Put option
- Call option
- European option
- Bermudan option
Q16 | The option contract which gives the seller the obligation to buy is
- Put option
- Call option
- American option
- European option
Q17 | The option contract that can be exercised at any time before the maturity date is known as
- European option
- American option
- Bermudan option
- None of the above
Q18 | The option contract which can be exercised on a few dates before the maturity date
- Bermudan option
- American option
- European option
- All the above
Q19 | The amount to be deposited by buyer and seller of future contarct at the time of entering futurecontract
- Future margin
- Future premium
- Future payoff
- None of the above
Q20 | The option contract that can be exercised only at the date of maturity is called
- European option
- American option
- Bermudan option
- Call option
Q21 | Option strategy with combination of selling one put option at low strike price and buying put optionat a high strike price
- Put bear spread
- Call bear spread
- Long call butterfly
- Short call butterfly
Q22 | An option that would lead to negative cash flow if it were exercised immediately is
- In the money option
- Out of the money option
- At the money option
- With money option
Q23 | Asian option and look back options are types of
- Vanilla option
- Exotic option
- Real option
- Warrants
Q24 | Which of the following is long dated option traded generally traded over the counter
- Warrants
- LEAPS
- Baskets
- Real option
Q25 | A contract that confers the right to buy or sell foreign currency at a specified price at some future date
- Currency forwards
- Currency futures
- Currency options
- Currency Swaps