Chapter 1 - Intro to Derivatives

Question 0

Futures contracts bought on _______. any interaction btw buyer and seller?

Answer 0

exchange. trader does NOT know the counterparty, only deals with exchange

Question 1

in a forwards contract, one MUST take delivery. true or false

Answer 1

true

Question 2

forward contracts _____ have marking-to-market. and _____ marketable

Answer 2

no, not

Question 3

creation of products by people in the financial world

Answer 3

financial engineering

Question 4

hedge = insurance

Answer 4

synonom

Question 5

3 risk in forward agreement

Answer 5

1. No liquidity
2. No safety
3. Default (no $ or no need anymore)

Question 6

unlike forwards, futures have safety and liquidity in agreements. True or False?

Answer 6

True

Question 7

_______ for a contract is the delivery price that would be applicable to the contract if were negotiated today

Answer 7

forward price

Question 8

down payment on futures/option transaction =

Answer 8

initial margin

Question 9

who decides what trades in the futures market?

Answer 9

the market!

Question 10

futures: Long is for ______ market, Short is for _____ market

Answer 10

bullish; bearish