Derivatives chp 6

What was the main purpose of forward contracts in the agricultural markets?

Why did farmers and merchants enter into forward contracts?

What was the significance of the Chicago Board of Trade (CBOT) in derivatives history?

How did early derivative contracts bring certainty into commerce?

What do commodity markets specialize in trading?

Why are standardized contracts essential in commodity markets?

What is the main purpose of using derivatives in investment management?

What is the primary difference between over-the-counter (OTC) trading and exchange-traded derivatives?

In the context of derivatives, what is arbitrage?

Which type of contract allowed for standardised trading of grain for a fixed future price on a specific delivery date?

What is a key characteristic of futures contracts that distinguishes them from forward contracts?

Why do portfolio managers use hedging techniques with futures contracts?

What is the primary function of derivatives in trading financial assets?

Do futures contracts help in making swift changes to asset allocation without directly buying or selling securities?

What is the primary objective of asset allocation changes using derivatives?

Which of the following statements holds true about commodity derivatives trading?

What is the main function of a futures contract?

In a futures contract, what does 'going long' mean?

What does 'going short' refer to in a futures contract?

What term is used for the initial trade when entering into a futures contract?

When do most futures contracts get closed out instead of being delivered?

What does 'naked' refer to in relation to a futures contract?

Why do buyers in futures contracts often close out before the delivery date?

'Covered' in a futures contract refers to:

'Long' in a futures contract means:

What is the main difference between 'long' and 'short' positions in a futures contract?

What was the key development that allowed options to be readily priced and led to the opening of the Chicago Board Options Exchange in 1973?

What is the main difference between a future and an option?

Which class of option gives the buyer the right to buy the underlying asset at a specified price?

What term is used to refer to the seller of an option who is obliged to take delivery if the buyer exercises the option?

How are exchange-traded options contracts typically settled between buyers and sellers?

What is the function of the premium paid in an options contract?

In what market can options be traded with contract specifications that are not standardised?

Which party in an options contract has the right but not the obligation to exercise the option?

What does a put option allow a buyer to do?

What is a key characteristic that distinguishes a call option from a put option?

What is the term used to describe oil with low sulphur content?

Which organization consists of oil-producing countries that sometimes restrict oil supply to influence prices?

What is one advantage of investing in derivatives mentioned in the text?

One of the drawbacks mentioned in the text about derivatives investing is:

What is a key requirement in the OTC derivatives markets according to the text?

What enables investors to reduce risks associated with their investment portfolios?

What is the purpose of credit derivatives?

In a credit default swap (CDS), what does the party buying credit protection do?

What does the term 'floating rate' typically refer to in financial contexts?

How is a derivative commonly used to manage risk?

What is the main function of a credit default swap (CDS)?

What is the purpose of using commodities as an investment asset class?

Why are derivatives mostly used in financial markets?

What differentiates credit derivatives from traditional insurance policies?

What is a common feature of derivatives markets?

In what way does a floating rate differ from a fixed rate?

What is the main difference between OTC derivatives and exchange-traded derivatives?

Which region predominantly engages in trading interest rate swaps through the OTC market?

What is the primary function of a central counterparty (CCP) in derivatives trading?

Which of the following is not a leading derivatives exchange mentioned in the text?

Where is Eurex, one of the leading derivatives exchanges, based?

What percentage of business conducted by the London Metal Exchange (LME) comes from overseas?

In which type of markets are non-ferrous metals like copper and zinc traded as derivatives?

'Gold is often seen as a safe haven' in times of crisis. What does this statement imply about gold's price during crises?

'Field of origin' and 'Density' are primary factors used to define what type of commodity?

'Producers use the market for hedging their production.' Why do producers engage in hedging their production?

What happens if Jersey shares are below US$3.50 three months later?

What is the maximum loss for Frank when he paid a premium of 42 cents to Steve?

What level do Jersey plc shares have to reach for Frank to make a profit?

What is the most Steve can gain from the premium?

What is Steve's potential loss when writing an option?

'Covered' and 'naked' refer to what distinction in writing options?

What is the main purpose of interest rate swaps?

'Legs of a swap' refer to what in an interest rate swap?

'Notional amount' in an interest rate swap represents what?