MCQOPTIONS
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MCQOPTIONS
This section includes 248 Mcqs, each offering curated multiple-choice questions to sharpen your Software Engg knowledge and support exam preparation. Choose a topic below to get started.
| 151. |
If the maturity of futures contract mismatchesfuture hedging is known as |
| A. | Short hedge |
| B. | Delta hedge |
| C. | Cross hedge |
| D. | Imperfect hedge |
| Answer» C. Cross hedge | |
| 152. |
Market players who take benefits from difference in market prices are called |
| A. | Speculators |
| B. | Arbitrageurs |
| C. | Hedgers |
| D. | Spreaders |
| Answer» C. Hedgers | |
| 153. |
If you sold a short contract on financial futures you hope interest rates |
| A. | rise. |
| B. | fall. |
| C. | are stable. |
| D. | fluctuate. |
| Answer» B. fall. | |
| 154. |
The risk arising from counterparty’sfailure to meet its fianacial obligation is |
| A. | Market risk |
| B. | Liquidity risk |
| C. | Operation risk |
| D. | Credit risk |
| Answer» E. | |
| 155. |
The contract which gives the buyer the right but not obligation |
| A. | Options |
| B. | Futures |
| C. | Swaps |
| D. | Forwards |
| Answer» B. Futures | |
| 156. |
------------ are formed by using the options on the same asset with same strike price but withdifferent expiration dates |
| A. | Box spread |
| B. | Ratio spread |
| C. | Calendar spread |
| D. | Call put spread |
| Answer» D. Call put spread | |
| 157. |
The total number of futures/option contracts outstanding at the close of the previous day’s trading is |
| A. | Open interest |
| B. | Outstanding contract |
| C. | Closed interest |
| D. | None of the above |
| Answer» B. Outstanding contract | |
| 158. |
The persons who enter into derivative contract in anticipation of lower expected return at thereduced risk |
| A. | Hedgers |
| B. | Speculators |
| C. | Spreaders |
| D. | Arbitrageurs |
| Answer» D. Arbitrageurs | |
| 159. |
A contract that confers the right to buy or sell foreign currency at a specified price at some future date |
| A. | Currency forwards |
| B. | Currency futures |
| C. | Currency options |
| D. | Currency Swaps |
| Answer» D. Currency Swaps | |
| 160. |
The amount paid for an option is the |
| A. | strike price. |
| B. | premium. |
| C. | discount. |
| D. | commission. |
| Answer» C. discount. | |
| 161. |
when the gains or losses in the futures do not exactly offset the loss/gainsin the physical market |
| A. | Long hedge |
| B. | Short hedge |
| C. | Perfect hedge |
| D. | Imperfect hedge |
| Answer» E. | |
| 162. |
The option contract whose underlying asset consist of stock market indices |
| A. | Stock option |
| B. | Stock index option |
| C. | Currency option |
| D. | Equity option |
| Answer» C. Currency option | |
| 163. |
The system of daily settlement in the future market is |
| A. | Marking to market |
| B. | Market making |
| C. | Market backwardation |
| D. | Market moving |
| Answer» B. Market making | |
| 164. |
ETD stands for |
| A. | Electronic traded serivatives |
| B. | Equity traded derivatives |
| C. | Exchange traded derivatives |
| D. | Estimated trade delay |
| Answer» D. Estimated trade delay | |
| 165. |
All other things held constant premium on options will increase when the |
| A. | Exercise price increases |
| B. | Volatility of the underlying assets fails |
| C. | Term to maturity increases |
| D. | Both B & C |
| Answer» D. Both B & C | |
| 166. |
The option contract which gives the buyer the right to buy the underlying asset is |
| A. | Put option |
| B. | Call option |
| C. | European option |
| D. | Bermudan option |
| Answer» C. European option | |
| 167. |
Which of the following has the right to sell an asset at a predetermined price? |
| A. | A put writer. |
| B. | A put buyer. |
| C. | A call buyer. |
| D. | A call writer. |
| Answer» C. A call buyer. | |
| 168. |
Which of the following strategies will be profitable if the price of the underlying asset is expectedto decrease? |
| A. | Selling a call. |
| B. | Selling a put. |
| C. | Buying a put. |
| D. | Buying a call. |
| Answer» B. Selling a put. | |
| 169. |
The main reason to buy an option on a futures contract rather than the futures contract is |
| A. | to reduce transaction cost |
| B. | to preserve the possibility for gains |
| C. | to limit losses |
| D. | remove the possibility for gains |
| Answer» C. to limit losses | |
| 170. |
A swap that pays certain fixed amount if the rate is above or below a certain level. |
| A. | Barrier swap |
| B. | Digital swap |
| C. | Chooser swap |
| D. | Corridor swap |
| Answer» C. Chooser swap | |
| 171. |
The hedging strategy which results in exact offsetting of gains and losses in the futures market andphysical market is known as |
| A. | Short hedge |
| B. | Long hedge |
| C. | Imperfect hedge |
| D. | Perfect hedge |
| Answer» E. | |
| 172. |
The option contract which can be exercised on a few dates before the maturity date |
| A. | Bermudan option |
| B. | American option |
| C. | European option |
| D. | All the above |
| Answer» B. American option | |
| 173. |
When the maturity matches but the size of the futures does not match, the hedge can be |
| A. | Long hedge |
| B. | Short hedge |
| C. | Cross hedge |
| D. | Delta cross hedge |
| Answer» D. Delta cross hedge | |
| 174. |
The option contract that can be exercised only at the date of maturity is called |
| A. | European option |
| B. | American option |
| C. | Bermudan option |
| D. | Call option |
| Answer» B. American option | |
| 175. |
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. |
| A. | VaR |
| B. | VaM |
| C. | VaG |
| D. | VaK |
| Answer» B. VaM | |
| 176. |
Which of the following is potentially obligated to sell an asset at a predetermined price |
| A. | Put writer |
| B. | A call writer |
| C. | A put buyer |
| D. | A call buyer |
| Answer» B. A call writer | |
| 177. |
A swap agreement created through the synthesis of two swaps differing in duration for the purposeof fulfilling the specific time frame needed of an investor |
| A. | Forward starting swap |
| B. | Roller coaster swap |
| C. | Amortizing swap |
| D. | Accreting swap |
| Answer» B. Roller coaster swap | |
| 178. |
A swap agreement that allows the purchaser to fix the duration of received flows on aswap. |
| A. | Constant maturity swap |
| B. | Accreting swap |
| C. | Roller-coasterswap |
| D. | Forward starting swap |
| Answer» B. Accreting swap | |
| 179. |
Which of the following does the most to reduce default risk for futures contracts? |
| A. | Marking to market. |
| B. | Flexible delivery arrangements. |
| C. | High liquidity. |
| D. | Credit checks for both buyers and sellers. |
| Answer» B. Flexible delivery arrangements. | |
| 180. |
…………. risk is a loss may occur from the failure of another party to perform according tothe terms of a contract? |
| A. | Credit |
| B. | Currency |
| C. | Market |
| D. | Liquidity |
| Answer» B. Currency | |
| 181. |
The number of future contract outstanding is called ………….? |
| A. | Liquidity |
| B. | Float |
| C. | Volume |
| D. | Turnover |
| Answer» B. Float | |
| 182. |
Option strategy with combination of selling one put option at low strike price and buying put optionat a high strike price |
| A. | Put bear spread |
| B. | Call bear spread |
| C. | Long call butterfly |
| D. | Short call butterfly |
| Answer» B. Call bear spread | |
| 183. |
A swap where principal amount decreases over prespecified points of time over the life time of swap |
| A. | Forward starting swap |
| B. | Roller coaster swap |
| C. | Amortizing swap |
| D. | Asian swaps |
| Answer» B. Roller coaster swap | |
| 184. |
The date on which option expires is known as |
| A. | Exercise date |
| B. | Expiration date |
| C. | Contract date |
| D. | Maturity date |
| Answer» C. Contract date | |
| 185. |
An option allowing the owner to sell an asset at a future date is a …………… |
| A. | Put option |
| B. | Call option |
| C. | Forward option |
| D. | Future contract |
| Answer» B. Call option | |
| 186. |
The initial amount paid by option buyer at the time of entering the contract |
| A. | Option margin |
| B. | Option premium |
| C. | Option money |
| D. | Option title |
| Answer» C. Option money | |
| 187. |
Which of the following is not a problem with an interest rate forward contract? |
| A. | Low interest rate |
| B. | default risk |
| C. | lack of liquidity |
| D. | finding a counterparty |
| Answer» B. default risk | |
| 188. |
Hedging risk for a short position is accomplished by |
| A. | taking a long position. |
| B. | taking another short position. |
| C. | taking additional long and short positionsin equal amounts. |
| D. | taking a neutral position. |
| Answer» B. taking another short position. | |
| 189. |
Which of the following is best described as selling a synthetic asset and simultaneouslybuying the actual asset? |
| A. | Diversifying. |
| B. | Arbitrage. |
| C. | Speculating. |
| D. | Hedging. |
| Answer» C. Speculating. | |
| 190. |
The buyer in the derivative contract is also known as |
| A. | Deep in the contract |
| B. | Middle in the contract |
| C. | Short in the contract |
| D. | Long in the contract |
| Answer» E. | |
| 191. |
Option pricing model developed John Cox,Stephen Ross and Mark Rubinstein is |
| A. | Binomial Option pricing Model |
| B. | Black schools model |
| C. | Cost of carry model |
| D. | Backwardation model |
| Answer» B. Black schools model | |
| 192. |
The risk that arises due to adverse movementsin the price of a financial asset or commodity |
| A. | Credit risk |
| B. | Market risk |
| C. | Legal risk |
| D. | Liquidty risk |
| Answer» C. Legal risk | |
| 193. |
All other things held constant, premiums on options will increase when the |
| A. | exercise price increases. |
| B. | volatility of the underlying asset increases. |
| C. | term to maturity decreases. |
| D. | futures price increases. |
| Answer» C. term to maturity decreases. | |
| 194. |
Which of the following is long dated option traded generally traded over the counter |
| A. | Warrants |
| B. | LEAPS |
| C. | Baskets |
| D. | Real option |
| Answer» B. LEAPS | |
| 195. |
The payoffs for financial derivatives linked to |
| A. | Securities that will be issued in the future |
| B. | The volatality of interest rates |
| C. | previously issued securities |
| D. | none of the above. |
| Answer» D. none of the above. | |
| 196. |
Futures contracts are more successful than interest rate forward contracts because they : |
| A. | are less liquid |
| B. | have greater default risk |
| C. | are more liquid |
| D. | have an interest rate tied to the discount rate |
| Answer» D. have an interest rate tied to the discount rate | |
| 197. |
Which of the following investment strategies has unlimited profit potential? |
| A. | Writing a call. |
| B. | Bull spread. |
| C. | Protective put. |
| D. | Covered call. |
| Answer» D. Covered call. | |
| 198. |
The approach which assumesthat the expected basis would be equal to zero |
| A. | Normal backwardation approach |
| B. | Contago |
| C. | Expectation hypothesis |
| D. | None of the above |
| Answer» D. None of the above | |
| 199. |
Composite value of traded stocks group of secondary market is classified as |
| A. | Stock index |
| B. | Primary index |
| C. | Stock market index |
| D. | Limited liability index |
| Answer» D. Limited liability index | |
| 200. |
Which of the following is Non varience based models of computation of VaR |
| A. | Historical method |
| B. | Monte carlo simulation |
| C. | Delta noramal |
| D. | All the above |
| Answer» E. | |