Derivatives Market Forwards Quiz
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Questions and Answers

What is the primary purpose of entering into a forward contract?

  • To increase liquidity in the market
  • To list the contract on exchanges
  • To speculate on the future price of an asset
  • To fix the price and avoid price risk (correct)

    • What happens if the spot price is higher than the forward price in a forward contract?

  • There is no impact on the contract
  • The contract gets listed on exchanges
  • The contract becomes favorable
  • The contract becomes unfavorable (correct)

    • Why do other market participants find it difficult to access forwards contracts?

  • They are tailor-made contracts (correct)
  • They are traded on exchanges
  • They are standardized contracts
  • They are highly regulated contracts

    • What risk arises due to the tailor-made nature of forward contracts?

    <p>Liquidity risk</p> Signup and view all the answers

    In a forward contract, what is the net profit per 10 grams if you buy gold at Rs. 62,337 and sell it at Rs. 62,700?

    <p>$363</p> Signup and view all the answers

    What factor contributes to illiquidity in forward contracts?

    <p>Tailor-made nature of the contracts</p> Signup and view all the answers

    Which risk refers to the ability of market participants to buy or sell an underlying asset?

    <p>Liquidity risk</p> Signup and view all the answers

    What makes it challenging for other market participants to easily access forward contracts?

    <p>'Non-availability on exchanges'</p> Signup and view all the answers

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