Quiz sur les marchés OTC et les intérêts ouverts

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Questions and Answers

Which of the following is true about call options?

Call options can only be exercised at maturity.

Call options give the right to sell at a certain price before a certain date.

Call options can be exercised whenever.

Call options give the right to buy at a certain price before a certain date. (correct)

What is the purpose of forward contracts?

To neutralize risk by fixing the price of the underlying asset. (correct)

To reduce the risk faced by hedgers.

To bet on the future direction of a market variable.

To provide insurance against adverse price movements.

What are the three broad categories of traders who use derivatives?

Buyers, sellers, and market makers.

Investors, brokers, and dealers.

Hedgers, speculators, and arbitrageurs. (correct)

Producers, consumers, and intermediaries.

Which category of derivative instruments involves an obligation for both the buyer and the seller to honor the deal?

Forward contract Signup and view all the answers

What are the main types of optional derivative instruments?

Floor, cap, collar Signup and view all the answers

What is the main advantage of trading on organized markets?

Quality of the product Signup and view all the answers

Which region dominates the global futures and options market in terms of open interest?

North America Signup and view all the answers

Which one of the following statements accurately describes hedging?

Hedging aims at reducing risks Signup and view all the answers

What is the difference between the over-the-counter (OTC) market and the exchange-traded market?

OTC market has more default risk and opacity compared to the exchange-traded market Signup and view all the answers

What is the main purpose of speculators in futures markets?

To add liquidity to the market Signup and view all the answers

Which of the following is the primary function of derivatives markets?

Risk transfer Signup and view all the answers

What is the main goal of risk management in derivatives markets?

To cover against market fluctuations Signup and view all the answers

What is the process through which futures markets reveal information about future spot prices?

Price discovery Signup and view all the answers

What is the relationship between volatility and potential returns and losses in the market?

Higher volatility leads to higher potential returns and lower potential losses Signup and view all the answers

Which of the following is true about open interest in the OTC market?

Open interest remains constant as long as the instrument is being exchanged Signup and view all the answers

What is the main change introduced by CCP in the OTC market?

Centralized clearing and settlement Signup and view all the answers

Which of the following is NOT a characteristic of the OTC market?

It is a physical place where trading takes place Signup and view all the answers

What is the purpose of trade compression in the OTC market?

To reduce the number of transactions Signup and view all the answers

Study Notes

Call Options

Call options grant the holder the right, but not the obligation, to purchase an underlying asset at a specified price before expiration.

Forward Contracts

Forward contracts are agreements to buy or sell an asset at a predetermined price at a specified future date, used primarily for hedging against price fluctuations.

Categories of Traders

Three broad categories of traders utilizing derivatives:
- Hedgers - aim to reduce risk associated with price changes.
- Speculators - seek to profit from price changes.
- Arbitrageurs - exploit price discrepancies across different markets.

Obligatory Derivatives

Futures contracts involve an obligation for both the buyer and seller to fulfill the terms of the deal at expiration.

Optional Derivative Instruments

Main types of optional derivative instruments include calls and puts, which provide rights for purchase and sale respectively.

Organized Markets Advantage

The main advantage of trading on organized markets is enhanced liquidity, which aids in efficient order execution and price discovery.

Global Market Dominance

North America, particularly the United States, dominates the global futures and options market in terms of open interest.

Hedging

Hedging is a risk management strategy that involves taking a position in the derivatives market to offset potential losses in an underlying asset.

OTC vs Exchange-Traded Market

The over-the-counter (OTC) market operates without a centralized exchange and allows for customized contracts, while the exchange-traded market involves standardized contracts through a central exchange.

Role of Speculators

Speculators play a critical role in futures markets by taking on risk to provide liquidity and facilitate price discovery.

Primary Function of Derivatives Markets

The primary function of derivatives markets is to allow for risk management through hedging and to enable price discovery through market transactions.

Risk Management Goals

The main goal of risk management in derivatives markets is to minimize potential financial losses while achieving desired investment or operational outcomes.

Price Information Revelation

Futures markets reveal information about future spot prices through the collective expectations of market participants reflected in current pricing.

Volatility and Market Returns

There is a direct relationship between volatility and potential returns; higher volatility can lead to larger potential gains but also increased potential losses.

Open Interest in the OTC Market

Open interest in the OTC market represents the total number of outstanding derivative contracts that are active and not yet settled.

Central Counterparty Clearing (CCP)

The main change introduced by Central Counterparty Clearing (CCP) in the OTC market enhances market stability by acting as an intermediary between buyers and sellers.

OTC Market Characteristics

Characteristics of the OTC market include less regulatory oversight, greater counterparty risk, and flexible contract terms, with an emphasis on customization.

Trade Compression Purpose

Trade compression in the OTC market aims to reduce the number of outstanding trades, thereby decreasing counterparty risk and optimizing capital use.

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Description

Quiz sur les marchés de gré à gré (OTC) et les intérêts ouverts. Testez vos connaissances sur les différences entre les intérêts ouverts et le volume, ainsi que sur les caractéristiques des marchés OTC tels que leur nature décentralisée et leur fonctionnement via un réseau informel d'agents et de courtiers. Découvrez également l'importance du CCP (centrale