Derivatives

Question 1

a contract the value of which is dependent on fluctuations in one or more underlying assets or indices

Answer 1

derivative

Question 2

_______ provide the holder of the option with right, but not obligation, to buy or sell the underlying for a fixed price on or before a specific date

Answer 2

option based derivatives

Question 3

a _____ gives the holder the right to buy one unit of the underlying for a fixed price

Answer 3

call option

Question 4

a ____ gives the holder the right to sell one unit of the underlying for a fixed price anytime on or before the expiry date

Answer 4

put options

Question 5

two main types of derivatives?

Answer 5

option based derivative & forward contracts

Question 6

standardized forward contracts and often trade on organized exchanges

Answer 6

futures

Question 7

require the counterparties to exchange cash flows at a specified intervals on or before a maturity date. The underlying cash flows can be based on the interest rates, exchange rates, commodity prices and index

Answer 7

swap contracts

Question 8

_____ require the payment of the agreed upon forward price in exchange for the underlying on or before the maturity date

Answer 8

Forward contracts