Podcast
Questions and Answers
What is the primary purpose of swaps in the market?
What is the primary purpose of swaps in the market?
- Exploiting price differences in different markets
- Reducing risks associated with volatile interest rates, currency exchange rates, and commodity prices (correct)
- Increasing leverage in trading activities
- Speculating on price movements
Which type of market participant uses derivatives to reduce their exposure to market variables like interest rates and share prices?
Which type of market participant uses derivatives to reduce their exposure to market variables like interest rates and share prices?
- Traders
- Investors
- Hedgers (correct)
- Arbitrageurs
Why do speculators prefer derivatives over underlying assets for trading purposes?
Why do speculators prefer derivatives over underlying assets for trading purposes?
- Derivatives provide leverage, are less expensive, and are faster to execute in size (correct)
- Derivatives are less risky
- Derivatives offer more liquidity
- Derivatives have lower transaction costs
Which market participant tries to predict future movements in prices of underlying assets?
Which market participant tries to predict future movements in prices of underlying assets?
What is the primary goal of arbitrageurs in the market?
What is the primary goal of arbitrageurs in the market?
Why do corporations and banks use derivative products?
Why do corporations and banks use derivative products?
What is one of the risks faced by market participants in derivatives trading?
What is one of the risks faced by market participants in derivatives trading?
Why do traders in the derivatives market want to take risks?
Why do traders in the derivatives market want to take risks?
What document should market participants carefully read before trading in derivatives?
What document should market participants carefully read before trading in derivatives?
Which of the following is NOT a risk associated with derivatives trading?
Which of the following is NOT a risk associated with derivatives trading?
What does the organized market provide in the context of the financial system?
What does the organized market provide in the context of the financial system?
Why may derivatives trading not be suitable for someone with limited resources?
Why may derivatives trading not be suitable for someone with limited resources?
What is the primary reason why corporations, investing institutions, banks, and governments use derivative products?
What is the primary reason why corporations, investing institutions, banks, and governments use derivative products?
In what ways are futures contracts beneficial for speculators compared to trading the underlying asset?
In what ways are futures contracts beneficial for speculators compared to trading the underlying asset?
Which type of market participant typically sells index futures to protect their equity portfolio from stock market corrections?
Which type of market participant typically sells index futures to protect their equity portfolio from stock market corrections?
What is a common application of futures contracts for traders in the derivatives markets?
What is a common application of futures contracts for traders in the derivatives markets?
Which participant in the derivatives market benefits the most from locking in a price for a future delivery using futures contracts?
Which participant in the derivatives market benefits the most from locking in a price for a future delivery using futures contracts?
Why do traders often prefer futures contracts when speculating on financial assets and commodities?
Why do traders often prefer futures contracts when speculating on financial assets and commodities?
