Underlying markets Flashcards
heating degree days and cooling degree days
heating: how many days will you have your heating on (if beyond then will get payout) (short the temp)
cooling: how many days will you need air con on in the summer (long the temp)
what is the normal maturity of JGBs
10 years
Which yield curve reflects prices and yields moving in the same direction for different maturities?
ANormal BInverted CBoth DNeither
Neither,
Only a flat yield curve would show prices and yields being constant across different maturities. For normal and inverted they move in opposite directions.
Which of the following is the best description of a collateralised debt obligation (CDO) squared?
AA derivative that creates an investment grade bond from a pool of junk bonds BA CDO which exposes the holder to twice the risk, as opposed to an ordinary CDO CA CDO that is created from a basket of CDOs DA CDO that invests in credit default swaps (CDSs)
A CDO that is created from a basket of CDOs ,
A CDO that is created from a basket of CDOs is a good definition of a CDO squared.
A derivative that creates an investment grade bond from a pool of junk bonds is a definition of a collateralised debt obligation.
A CDO that invests in credit default swaps (CDSs) is the definition of a synthetic CDO.
what is the definition of a collateralised debt obligation
A derivative that creates an investment grade bond from a pool of junk bonds is a definition of a collateralised debt obligation.
what is a synthetic CDO
A CDO that invests in credit default swaps (CDSs) is the definition of a synthetic CDO.
what are some examples of cryptocurrencies
Bitcoin, Litecoin, Ethereum, Ripple, Bitcoin cash, Ethereum classic
The highest expected gearing to share price movements would be:
AWarrants exercisable until 2019 BCumulative Redeemable Preference Shares 2019 CDeferred Ordinary Shares converting in 2019 DUnsecured Loan Stock 2019
Warrants exercisable until 2019 ,
The nature of warrants makes them more highly geared than other types of shares or debt. Warrants cost very little in comparison to the value of the share they have the right to buy.
How are T-bills usually issued?
ATo members of the public only BBy a placing CBy an intermediaries offer DBy tender offer
By tender offer
Banks accepting deposits in the inter bank market use which of the following as the average rate quote?
ALISTIR BLIBOR CLIBID DLIMEAN
LIBID,
London inter-bank bid (LIBID) is the rate that banks uses to accept deposits. LIBOR is what banks use to lend funds.
what are emission rights
the right to produce certain types of emissions such as carbon dioxide and methane
Which of the following would cause an increase in the price of emission rights?
AThe invention of a new, ‘greener’ power station BThe announcement of a fall in the oil reserves of a company CA reduction in the demand for oil DThe announcement by the government of the closure of nuclear power stations
The announcement by the government of the closure of nuclear power stations,
An emission right is the right to produce certain types of emissions such as carbon dioxide and methane.
This is a tough question. Closure of nuclear power stations is likely to result in more demand for conventional fuel sources such as oil and coal and is therefore likely to increase emissions, which in turn would make emission contracts more valuable.
If an investor expects the Japanese interest rates to rise faster than the Euro rates which spread transaction should he undertake?
ABuy the Japanese government bond future, sell the German government bond future BSell the Japanese government bond future, sell the German government bond future CBuy the Japanese government bond future, buy the German government bond future DSell the Japanese government bond future, buy the German government bond future
Sell the Japanese government bond future, buy the German government bond future,
If Japanese interest rates increase at a faster rate, the JGB future will fall in value and should be sold. To achieve a spread trade, the German government bond future should be purchased.
Which of the following credit ratings is assigned to a bond in default by Fitch?
AB BC CD DE
C: D,
A bond in default is given a credit rating of D. Please note in Moody’s a default is C.
The US equivalent of LIBOR is:
ALombard rate BFed funds rate CTIBOR DRepo rate
Fed funds rate
