Derivative Products and Risk Management Quiz
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Questions and Answers

What is the basic principle behind using a derivative product to manage an identified risk exposure?

  • Guaranteeing a profit from the derivative product
  • Ignoring the current market conditions
  • Speculating on future market movements
  • Locking in a price today that will apply at a specified future date (correct)

    • What determines the price of a derivative contract?

  • Specified underlying commodity or financial instrument traded in the physical markets (correct)
  • Historical price movements
  • Government regulations
  • Current market sentiment

    • Which of the following is a generic derivative product?

  • Stocks
  • Real estate
  • Futures (correct)
  • Bonds

    • If commodity prices, interest rates, exchange rates, or share market prices move, what happens to the value of related derivative contracts?

    <p>The value of related derivative contracts also moves</p> Signup and view all the answers

    What does an interest rate futures contract derive its price from?

    <p>Financial instrument such as the 90-day bank-accepted bill, or the 3-year or 10-year Australian treasury bonds</p> Signup and view all the answers

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