Financial Derivatives And Risk Management Set 2
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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 2
Q1 | An option contract with underlying asset commoditiesis
- Commodity option
- Currency option
- Stock index option
- None of the above
Q2 | The risk arising from counterparty’sfailure to meet its fianacial obligation is
- Market risk
- Liquidity risk
- Operation risk
- Credit risk
Q3 | The difference between the future price and cash price is
- Basis
- Margin
- Premium
- Strike price
Q4 | The additional amount that has to deposited by the trader with broker to bring the balance of marginaccount to initial margin
- Initial margin
- Maintenance margin
- Variation margin
- Additional margin
Q5 | The system of daily settlement in the future market is
- Marking to market
- Market making
- Market backwardation
- Market moving
Q6 | The test used to check the validity of VaR estimate
- Black testing
- Back testing
- Back end test
- Back to back test
Q7 | Which measure is used to indicate the maximum loss that an investor could incur on an exposure ata point in time, determined at a certain confidence level.
- VaR
- VaM
- VaG
- VaK
Q8 | Which among the following is not a commodity future exchange
- NCDEX
- NSDL
- NMCE
- MCX
Q9 | The tendency of spot price and future price to come together is
- Principle of divergence
- Principle of convergence
- Principle of backwardation
- Principle of contango
Q10 | The condition where future prices are greater than cashprice resulting in positive basis is
- Normal backwardation
- Contango
- Expectation hypothesis
- Cost of carry
Q11 | ------------ are formed by using the options on the same asset with same strike price but withdifferent expiration dates
- Box spread
- Ratio spread
- Calendar spread
- Call put spread
Q12 | The difference between option premium and intrinsic value
- Time value
- Intrinsic value
- Money value
- Premium
Q13 | Option pricing model developed John Cox,Stephen Ross and Mark Rubinstein is
- Binomial Option pricing Model
- Black schools model
- Cost of carry model
- Backwardation model
Q14 | The type of swap agreement which gives seller the chance to terminate swap at any time beforematurity.
- Coupan swap
- Callable swap
- Putable swap
- Rate capped swap
Q15 | When Swap is combined with Option it is called
- Swaption
- Forwad Swaps
- Swap options
- All the above
Q16 | What is the time value of option at expiration
- Zero
- Same as strike price
- Same as exercise price
- Same as market price
Q17 | A option that provides a fixed payoff depending on the fulfilment of some condition
- Asian option
- Barrier option
- Binary option
- Lookback option
Q18 | Which of the following is a way to settle option contracts
- By exercising
- By letting option expire
- By offsetting
- All the above
Q19 | The date on which option expires is known as
- Exercise date
- Expiration date
- Contract date
- Maturity date
Q20 | The risk that arises due to adverse movementsin the price of a financial asset or commodity
- Credit risk
- Market risk
- Legal risk
- Liquidty risk
Q21 | The persons who enter into derivative contract with the objective of covering risk
- Hedgers
- Speculators
- Spreaders
- Arbitrageurs
Q22 | The persons who enter into derivative contract in anticipation of lower expected return at thereduced risk
- Hedgers
- Speculators
- Spreaders
- Arbitrageurs
Q23 | The approach which assumesthat the expected basis would be equal to zero
- Normal backwardation approach
- Contago
- Expectation hypothesis
- None of the above
Q24 | The type of hedge used by those who are short on the underlying asset
- Long hedge
- Short hedge
- Perfect hedge
- Imperfect hedge
Q25 | when the gains or losses in the futures do not exactly offset the loss/gainsin the physical market
- Long hedge
- Short hedge
- Perfect hedge
- Imperfect hedge