What is a derivative?

Forward and Futures Markets

Quiz
•
Business
•
University
•
Hard
NURHAZRINA RAHIM
Used 3+ times
FREE Resource
8 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
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
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