Hedging Instruments MCQs

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The process of protecting oneself against future price changes by shifting some or all of the risk to someone else is called:






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People who bet on price changes in the hope of making a profit are called:






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Borrowing a security and selling it with the hope of buying it back later at a cheaper price is called






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What is called the amount of cash put up by an investor, which is a fraction of the value the asset?






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An agreement to accept or make delivery of an asset on a particular future date at a price struck today is called a






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The exclusive marketplace in Canada for derivatives trading is a






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Which of the following is not common to both forward contracts and futures contracts?






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An individual who expects that prices for some asset will rise is said to take a






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The method whereby an investor assumes that futures and their spot prices move together and then considers how to hedge depending on whether spot pric...






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The differential between the spot price and the futures price is known as






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Which of the following exchanges does not trade in derivatives?






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The person who takes a short position usually






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A Canadian importer has ordered $1,000,000 US worth of software to be delivered in six months. The current spot exchange rate is $1.50 CAN = $1.00 US....






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Ft(t)=futures contract price purchased at time t for delivery date t; S(t) = spot price at time t; Rs = the yield on a short-term instrument; RL = the...






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The right but not the obligation to buy an asset at a particular price during a stipulated period is called a






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The right but not the obligation to sell an asset at a particular price during a stipulated period is called a






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When an asset is selling at a strike price below its market price, it is said to be






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Suppose an investor buys an option for a $1000 premium on a $100,000 August T-bill futures contract with a strike price of 120. On the expiration date...






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Suppose an investor buys an option for a $1000 premium on a $100,000 August T-bill futures contract with a strike price of 120. On the expiration date...






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If S = spot price, E = exercise price, then the value of a put option is given by






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Which of the following is not a factor of the Black-Scholes model of option pricing?






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The exchanges of interest rate payments or foreign currencies are called