Equities and F&O Segments Quiz
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Questions and Answers

What type of risks can market participants face in derivatives trading?

  • Market risk and operational risk
  • Credit risk and legal risk
  • Price risk and liquidity risk (correct)
  • Regulatory risk and systemic risk

    • Why do hedgers want to give away risk in the derivatives market?

  • To reduce market volatility
  • To gain speculative profits
  • To increase their leverage
  • To transfer risk to participants with a high risk appetite (correct)

    • What is the primary benefit of organized markets for derivatives trading?

  • Reduced liquidity
  • Higher leverage opportunities
  • Risk management mechanism and surveillance (correct)
  • Increased speculation

    • Which document should market participants carefully read when trading derivatives?

    <p>Model Risk Disclosure Document</p> Signup and view all the answers

    Why should individuals with limited resources be cautious when trading derivatives?

    <p>Derivatives may not be suitable for them due to leverage and risks</p> Signup and view all the answers

    What role does the broker play in derivatives trading?

    <p>Providing Model Risk Disclosure Document to clients</p> Signup and view all the answers

    What distinguishes organized markets from unorganized markets in the context of derivatives?

    <p>&quot;Shift of speculative trades&quot; and surveillance in organized markets</p> Signup and view all the answers

    Which type of risk arises from the inability to exit a position in derivatives trading?

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

    "Counterparty risk" in derivatives trading refers to the risk of:

    <p>&quot;Default by counterparty&quot;</p> Signup and view all the answers

    "Operational risk" for market participants in derivatives includes:

    <p>&quot;Inadequate documentation and fraud&quot;</p> Signup and view all the answers

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