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Past midterm problems for FINA 0301 Derivatives
Multiple Choice 1. Which from the following list is NOT a kind of derivative? (a) Options (b) Futures (c) Swaps (d) Commodities
2.
A derivative can be used for the following purpose except (a) Risk management (b) Speculation (c) Manipulating the market (d) Reducing the transaction cost
3.
The value of a forward contract at the time of inception is (a) Zero (b) Positive (c) Negative (d) unknown If you expect that market will be bullish, you should take a position of (a) Short call (b) Long call (c) Long put (d) Short stock
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5.
Suppose you have a long position on stock, you would like to protect the downside risk in a future period. What would you do? (a) Long a put (b) Long a call (c) Long a forward contract (d) Short a put Put-call parity says that (a) A put and a call have the same price (b) Long a call plus short a put is equivalent to a long forward (c) The price of a call plus the price of a put is equal to forward price (d) The price of a call minus the price of a put is equal to forward price
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A bull spread can be decomposed into (a) Long a put with higher strike and short a put with lower strike (b) Long a put with lower strike and short a call with higher strike (c) Long a call with higher strike and short a call with lower strike (d) Long a call with lower strike and short a call with higher strike
8.
A straddle is usually used to trade (a) Interest rate risk (b) Stock risk (c) Volatility risk (d) None of above
9.
A farmer produces wheat. He has an inherent (a) Short position in the wheat (b) Long position in the wheat (c) Neutral position in the wheat (d) Unknown position in the wheat
10. The farmer could hedge his position by (a) Short a put on wheat (b) Long wheat forward (c) Short wheat forward (d) Long a call on wheat
11. A bakery uses wheat to make bread. He has an inherent (a) Short position in the wheat (b) Long position in the wheat
Multiple Choice 1. Which from the following list is NOT a kind of derivative? (a) Options (b) Futures (c) Swaps (d) Commodities
2.
A derivative can be used for the following purpose except (a) Risk management (b) Speculation (c) Manipulating the market (d) Reducing the transaction cost
3.
The value of a forward contract at the time of inception is (a) Zero (b) Positive (c) Negative (d) unknown If you expect that market will be bullish, you should take a position of (a) Short call (b) Long call (c) Long put (d) Short stock
4.
5.
Suppose you have a long position on stock, you would like to protect the downside risk in a future period. What would you do? (a) Long a put (b) Long a call (c) Long a forward contract (d) Short a put Put-call parity says that (a) A put and a call have the same price (b) Long a call plus short a put is equivalent to a long forward (c) The price of a call plus the price of a put is equal to forward price (d) The price of a call minus the price of a put is equal to forward price
6.
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7.
A bull spread can be decomposed into (a) Long a put with higher strike and short a put with lower strike (b) Long a put with lower strike and short a call with higher strike (c) Long a call with higher strike and short a call with lower strike (d) Long a call with lower strike and short a call with higher strike
8.
A straddle is usually used to trade (a) Interest rate risk (b) Stock risk (c) Volatility risk (d) None of above
9.
A farmer produces wheat. He has an inherent (a) Short position in the wheat (b) Long position in the wheat (c) Neutral position in the wheat (d) Unknown position in the wheat
10. The farmer could hedge his position by (a) Short a put on wheat (b) Long wheat forward (c) Short wheat forward (d) Long a call on wheat
11. A bakery uses wheat to make bread. He has an inherent (a) Short position in the wheat (b) Long position in the wheat