Forward and Futures Markets

Forward and Futures Markets

University

8 Qs

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Forward and Futures Markets

Forward and Futures Markets

Assessment

Quiz

Business

University

Hard

Created by

NURHAZRINA RAHIM

Used 3+ times

FREE Resource

8 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a derivative?

A government bond

A type of stock

A financial instrument that derives its value from an underlying asset

A currency exchange rate

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is a characteristic of forward contracts?

They have fixed expiration dates

They have a liquid market

They can be customized to the needs of the parties

They are standardized and traded on exchanges

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the primary purpose of derivative markets?

To eliminate all risks

To facilitate hedging

To increase market volatility

To facilitate speculation

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the main disadvantage of forward contracts?

They are highly liquid

They have high default risk

They are standardized

They have a secondary market

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In futures trading, what does 'marking to market' refer to?

Setting the initial margin requirement

Calculating the basis risk

Adjusting the margin account to reflect daily gains or losses

Determining the futures price at expiration

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the basis in futures trading?

The risk of default by a counterparty

The difference between cash price and futures price

The total value of a futures contract

The initial margin required to open a position

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What happens to the futures price as the maturity date approaches?

It becomes irrelevant

It converges with the spot price

It remains constant

It diverges from the spot price

8.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is a key advantage of futures contracts over forward contracts?

They can be customized

They have a liquid market

They have no default risk

They are more flexible