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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?

Liquidity risk 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?

$363 Signup and view all the answers

What factor contributes to illiquidity in forward contracts?

Tailor-made nature of the contracts Signup and view all the answers

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

Liquidity risk Signup and view all the answers

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

'Non-availability on exchanges' Signup and view all the answers

Derivatives Market Forwards Quiz

Choose a study mode

Podcast

Questions and Answers

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

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

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

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

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?

What factor contributes to illiquidity in forward contracts?

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

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

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