Derivative Contracts Quiz

Scandals involving FIs, firms, and municipalities, such as Bankers Trust and the Allied Irish Bank, led to a tightening of the accounting requirements for derivative contracts.

Billions of dollars of losses on derivative securities led to a call for regulations to be imposed on the trading of derivative securities.

The lecture focuses on the role futures and forward contracts play in managing an FI’s interest-rate and credit risk exposures.

<p>Forward and futures contracts are compared to spot contracts.</p> Signup and view all the answers

<p>Derivative securities, mainly credit swaps, were at the heart of the financial crisis in 2008-2009.</p> Signup and view all the answers

<p>The rapid growth of derivatives use has been controversial due to scandals involving FIs, firms, and municipalities in the 1990s, as well as billions of dollars of losses on derivative securities in the late 2000s, leading to a call for regulations to be imposed on the trading of derivative securities.</p> Signup and view all the answers

<p>Futures and forward contracts play a role in managing an FI’s interest-rate and credit risk exposures by allowing hedging of these risks.</p> Signup and view all the answers

<p>Forward and futures contracts differ from spot contracts in that they involve agreements to buy or sell assets at a future date for a predetermined price, whereas spot contracts involve immediate transactions at the current market price.</p> Signup and view all the answers

<p>Some of the key scandals involving derivative contracts in the 1990s included those involving FIs, firms, and municipalities, such as Bankers Trust and the Allied Irish Bank.</p> Signup and view all the answers

<p>The scandals in the 1990s led to a tightening of the accounting requirements for derivative contracts, while the losses on derivative securities in the late 2000s led to a call for regulations to be imposed on the trading of derivative securities.</p> Signup and view all the answers