SANKARA INSTITUTE OF MANAGEMENT SCIENCE

SARAVANAMPATTI, COIMBATORE- 641 035

FIRST INTERNAL ASSESSMENT - MULTIPLE CHOICE QUESTIONS

DERIVATIVES MANAGEMENT

Maximum Marks: 50 Time Allowed: 1 hrs

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
c) IDBI
d) FMC

5. The ___________ is the world’s biggest exchange for trading in physical commodity
futures.
a) London Metal Exchange
b) The Chicago Board of Trade
c) Tokyo Commodity Exchange
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 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 dis-equilibrium?
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) Long
b) Short
c) Hedger
d) Arbitrageur

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

a) Financial Futures
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) Arbitrageurs
b) Speculators
c) Practicing convergence
d) Hedgers

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13. _______________are non-standardized agreements to buy or sell something at a price
determined today for delivery on a later date.
a) Forward agreements
b) Futures agreements
c) Options agreements
d) 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
c) Supervise trading on the exchange floor.
d) None of the above

19. Hedging involves:

a) taking a futures position opposite to one’s cash market position
b) taking a futures position identical to one’s cash market position
c) holding only a futures market position
d) 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.

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 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) Currency Call Option
b) Currency Put Option
c) Commodity Call Option
d) 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) Call Option
b) Put Option
c) Out-of-the money option
d) Naked Option
e) Covered Option
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.

All the Best

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