Podcast
Questions and Answers
Which type of derivative market participant uses derivatives to reduce the risk associated with an underlying asset?
Which type of derivative market participant uses derivatives to reduce the risk associated with an underlying asset?
- Market-maker
- Arbitrageur
- Hedger (correct)
- Speculator
What is the primary way that market-makers make money?
What is the primary way that market-makers make money?
- By speculating on market movements
- By selling derivatives at a high price and buying them at a low price (correct)
- By hedging their own positions
- By charging a commission on each trade
What is the main characteristic of Over-the-Counter (OTC) markets?
What is the main characteristic of Over-the-Counter (OTC) markets?
- They are traded on an exchange
- They are privately negotiated and customized (correct)
- They are only available to institutional investors
- They are standardized contracts
Which perspective focuses on the overall activities of the market and tries to make sense of everything?
Which perspective focuses on the overall activities of the market and tries to make sense of everything?
What is the primary goal of an end-user when entering into a derivative contract?
What is the primary goal of an end-user when entering into a derivative contract?
Which type of derivative market participant uses derivatives to take advantage of mis-pricing in the market?
Which type of derivative market participant uses derivatives to take advantage of mis-pricing in the market?
What is the primary characteristic of a call option?
What is the primary characteristic of a call option?
What is the main difference between European and American style options?
What is the main difference between European and American style options?
What happens when a futures contract is closed before expiry?
What happens when a futures contract is closed before expiry?
What is the primary feature of an option contract?
What is the primary feature of an option contract?
What is the purpose of a put option?
What is the purpose of a put option?
What is the significance of the expiry date in a futures contract?
What is the significance of the expiry date in a futures contract?
What is a characteristic of American style options?
What is a characteristic of American style options?
What is the role of the clearing house in an options contract?
What is the role of the clearing house in an options contract?
What is the primary difference between a fixed currency swap and a simple interest rate swap?
What is the primary difference between a fixed currency swap and a simple interest rate swap?
What is the term for the price at which an option is exercised?
What is the term for the price at which an option is exercised?
What is the term for the person who writes an option?
What is the term for the person who writes an option?
What is the purpose of a swap agreement?
What is the purpose of a swap agreement?
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