SANKARA INSTITUTE OF MANAGEMENT SCIENCE

SARAVANAMPATTI, COIMBATORE- 641 035

FIRST INTERNAL ASSESSMENT - MULTIPLE CHOICE
QUESTIONS
DERIVATIVES MANAGEMENT
Maximum Marks: 50
Allowed: 1 hrs

Time

Name: _____________
_____________

Roll No:

Choose the most appropriate answer from the alternatives given.

Each question carries two marks.
(25 *2=50 Marks)
1. Which of the following is not the function of the clearinghouse?
a) Collect margins from member
b) Guarantee validity of delivery
c) Monitor delivery & settlement process.
d) Effect pay in & pay out.
2. ___________ is the oldest existing commodity exchange in the world
established in the
year __________?
a) CME, 1948
b) COMEX, 1854
c) CBOT, 1848
d) BMD, 1919
3. In futures contracts, all of the following parameters are usually
standardized by way
of contract specification, except the __________?
a) Quantity
b) Quality
c) Price
d) Tender Period/ Delivery Period
4. Name the regulatory body that governs commodities derivatives
trading in India?
a) SEBI
b) RBI
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c) IDBI
d) FMC
5. The ___________ is the worlds biggest exchange for trading in physical
commodity
futures.
a) London Metal Exchange
b) The Chicago Board of Trade
c) Tokyo Commodity Exchange
d) The New York Mercantile Exchange.
6. Futures contracts are traded
a) Over the counter.
b) On stock exchanges.
c) Through private placement.
d) All the above.
7. Using futures contracts to transfer price risk is called:
a) Speculating
b) Arbitrage
c) Hedging
d) Diversifying
8. Which of the following is best described as simultaneous buying &
selling in two different market to take advantage of price disequilibrium?
a) Speculating
b) Arbitrage
c) Hedging
d) Diversifying
9. Futures Contracts are:
a) The same as forward contracts
b) Standardised contracts to make or take delivery of a commodity at
a predertermined place and time
c) Contracts with standardized price terms
d) Contract done through OTC
10. The buyer of the future contract is called --------a)
b)
c)
d)

Long
Short
Hedger
Arbitrageur

11. Which of the following is not an example of a derivative?

a) Financial Futures
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b) Preferred stock bought on the spot market

c) Options
d) Swaps
12. Traders who make a riskless profit by buying in one market and
reselling in another market are:
a)
b)
c)
d)

Arbitrageurs
Speculators
Practicing convergence
Hedgers

13. _______________are non-standardized agreements to buy or sell

something at a price determined today for delivery on a later date.
a)
b)
c)
d)

Forward agreements
Futures agreements
Options agreements
Performance bonds

14. The responsibility of enforcing futures contracts is taken on by:

a) The broker who struck the deal
b) A clearing house
c) The buyer and seller
d) Arbitrageurs
15. The forward market is regulated by the _____.
a) CME
b) Organized exchanges
c) Commodity Futures Commission
d) None of the above
16. Standardized futures contracts exist for all of the following underlying
assets except:
a) Stock indexes
b) Treasury bonds
c) Gold
d) Common stocks.
17. Futures prices are arrived at by:
a) Bids and Offers
b) Officers and directors of the exchange
c) Written and sealed bids
d) The Board of Trade Clearing Corporation
18. The primary function of the Clearing Corporation is to:
a) Prevent speculation in futures contracts.
b) Ensure the integrity of the contracts traded
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c) Supervise trading on the exchange floor.

d) None of the above
19. Hedging involves:
a)
b)
c)
d)

taking a futures position opposite to ones cash market position

taking a futures position identical to ones cash market position
holding only a futures market position
holding only a cash market position

20. --------------- option is the right to buy or sell a foreign currency at a

specified price through a specified date.
a) Commodity option
b) Currency Option
c) European option
d) American Option
21. ____________gives the buyer the right, but not the obligation, to buy a
particular foreign currency at a specified price anytime during the life
of the option.
a)
b)
c)
d)

Currency Call Option

Currency Put Option
Commodity Call Option
Commodity Put Option

22. ______________is the price at which the buyer of an option has the right
to buy or sell an underlying currency.
a) Delivery price
b) Bid price
c) Offer price
d) Strike price
23. Futures contracts of the following currencies are traded on the Chicago
Mercantile Exchange except ____.
a) British Pound
b) Japanese Yen
c) Swiss Franc
d) Chinese Yuan
24. An option which gives the holder the right to sell a stock at a specified
price at sometime in the future is called a(n)
a)
b)
c)
d)
e)

Call Option
Put Option
Out-of-the money option
Naked Option
Covered Option
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25. Which of the following is a major difference between swaps and

futures contracts?
a) Swaps are derivative securities, but futures contracts are not.
b) Swaps are typically short term, whereas futures contracts tend
to extend over several years.
c) A futures contract involves only one future transaction, whereas
a swap typicallyinvolves several future transactions.
d) Swaps are usually marked to market, whereas futures contracts
are not.