Derivatives Market Growth Factors

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What has led to the reduction of transaction costs in the derivatives market?

Use of latest technology in communications (correct)

Enhanced understanding of market participants on sophisticated risk management tools

Integration of financial markets globally

Increased fluctuations in underlying asset prices

What has driven the growth of financial derivatives market?

Increased fluctuations in underlying asset prices, integration of financial markets globally, and other factors (correct)

Only integration of financial markets globally

Only increased fluctuations in underlying asset prices

Only frequent innovations in derivatives market and newer applications of products

What has enabled market participants to manage risk more effectively?

Increased fluctuations in underlying asset prices

Enhanced understanding of market participants on sophisticated risk management tools (correct)

Integration of financial markets globally

Frequent innovations in derivatives market and newer applications of products

What has been the result of the growth of the derivatives market over the last five decades?

A phenomenal growth in the derivatives market Signup and view all the answers

What has facilitated the integration of financial markets globally?

Use of latest technology in communications Signup and view all the answers

What is a derivative based on?

The value of some other asset Signup and view all the answers

What is the underlying asset in a derivative contract?

Any commodity or financial asset Signup and view all the answers

What is the significance of the derivatives market?

It provides a platform for risk management Signup and view all the answers

What are some of the risks associated with derivatives trading?

Increased volatility Signup and view all the answers

What is the history of derivatives mapped back to?

Several centuries Signup and view all the answers

What is the primary objective of NISM Certification programs?

To enhance the quality and standards of professionals employed in the financial services sector Signup and view all the answers

What are some examples of agri commodities that can be underlying assets?

Wheat, Sugar, Coffee, and Cotton Signup and view all the answers

What is the primary focus of NISM’s School for Certification of Intermediaries (SCI)?

Developing and conducting certification examinations and Continuing Professional Education (CPE) programs Signup and view all the answers

What is the outcome of NISM certification examinations and training programs?

Providing a structured learning plan and career path to students and job aspirants Signup and view all the answers

What is the significance of NISM Certifications?

Establishing knowledge benchmarks for various market products and functions Signup and view all the answers

What is the purpose of the workbooks provided by NISM?

To assist candidates in understanding the subject and preparing for NISM Examinations Signup and view all the answers

How many individuals have been certified by NISM through its Certification Examinations and CPE Programs as of March 2023?

17 lakh individuals Signup and view all the answers

Which year did the Chicago Board Options Exchange introduce options on stock indices?

1983 Signup and view all the answers

What was the main recommendation of the committee set up by SEBI in 1996?

To declare derivatives as securities Signup and view all the answers

What was the first stock index futures launched in 1982?

The Kansas City Board of Trade Index Signup and view all the answers

What was introduced by CME in 1982?

Eurodollar futures contract Signup and view all the answers

What is one of the factors driving the growth of financial derivatives?

Increased integration of financial markets globally Signup and view all the answers

Who chaired the committee set up by SEBI in 1996?

Dr. L.C. Gupta Signup and view all the answers

What is the underlying asset of the Nifty futures contract in the example?

Nifty 50 index Signup and view all the answers

What is the purpose of the contract multiplier in futures contracts?

To calculate the contract value Signup and view all the answers

What is the value of the underlying price of the Nifty 50 index on May 10, 2023?

18315.10 Signup and view all the answers

What is the total number of contracts traded in the Nifty futures contract as on May 10, 2023?

47,56,000 Signup and view all the answers

What is the high price of the Nifty futures contract as on May 10, 2023?

18358.50 Signup and view all the answers

Why can the contract size be changed by the exchange from time to time?

Due to changes in the index level and stock prices Signup and view all the answers

In a crisis, what happens to the demand for essential commodities like grains and energy products?

It increases due to hoarding behavior. Signup and view all the answers

What is convenience yield?

The return from holding an asset for convenience. Signup and view all the answers

Why may futures trade at a discount to the cash market?

When convenience yield dominates the cost of carry. Signup and view all the answers

What is a necessary condition for convenience yield to arise?

Scarcity of a commodity. Signup and view all the answers

Why does reverse arbitrage become impossible in certain situations?

Because no one lends traders the assets to sell short in the cash market. Signup and view all the answers

What happens to the cash and carry model in certain situations?

It breaks down and cannot be applied. Signup and view all the answers