Question 1: A derivative is a financial contract that derives its value from an underlying asset.
✔ True
✘ False
Question 2: Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price.
✔ True
✘ False
Question 3: An index option is a
✘ Cash market product
✔ Money market instrument
Question 4: Financial derivatives provide the facility for
✘ Trading
✘ Hedging
✘ Arbitraging
✔ All of the above
Question 5: Operational risks include losses due to
✔ Inadequate disaster planning
✘ Government policies
✘ Income tax regulations
Question 6: Impact cost is low when the liquidity in the system is poor.
✘ True
✔ False
Question 7: A calendar spread contract in index futures attracts
✘ Higher margin than sum of two independent legs of futures contract
✔ Lower margin than sum of two independent legs of futures contract
Question 8: In an equity scheme, fund can hedge its equity exposure by selling stock index futures.
✔ True
✘ False
Question 9: . Margins in 'Futures' trading are to be paid by
✘ buyer
✘ seller
✔ both the above
Question 10: When the near leg of the calendar spread transaction on index futures expires, the farther leg becomes a regular open pos
✔ True
✘ False
Question 11: Selling short a stock means
✘ Seller own the stock he is supposed to deliver
✔ Seller does not own the stock he is supposed to deliver
Question 12: Cost of carry model states that
✘ Price of Futures = Spot + Cost of Carry
✔ Price of Futures = Spot - Cost of Carry
Question 13: What role do speculators play in the futures market?
✔ They add to the liquidity in the futures markets
✘ They take delivery of the commodities at expiration
Question 14: A European call option gives the buyer the right but not the obligation to buy from the seller an underlying at the prevaili
price "on or before" the expiry date.
✔ False
✘ True
Question 15: A put option gives the buyer a right to sell how much of the underlying to the writer of the option?
✘ Any quantity
✔ Only the specified quantity (lot size of the option contract)
Question 16: An in-the-money option is an option with a ________ intrinsic value
✔ positive
✘ negative
Question17: Exchange traded options are
✔ Standardised options
✘ Customised options
Question 18: Higher the price volatility of the underlying stock of the put option, ________ would be the premium
✔ higher
✘ lower
Question 19: In which option is the strike price better than the market price
(i.e., price difference is advantageous to the option holder) and therefore it is profitable to exercise the:
✘ At-the-money option
✘ Out-of the money option
✔ In-the -money option
Question 20: Three Call series of XYZ stock - January, February and March are quoted. Which will have the lowest Option Premium (sa
✔ January
✘ February
✘ March
Question 21: Which is the ratio of change in option premium for the unit change in interest rates?
✘ Theta
✘ Gamma
✔ Rho
Question 22: On the derivative exchanges, all the orders entered on the Trading System are at prices exclusive of brokerage.
✔ True
✘ False
Question 23: If an investor buys a call option with lower strike price and sells another call option with higher strike price, bot
same expiration date, the strategy is called ______
✘ Bearish spread
✔ Bullish spread
Question 24: A defaulting member's clients’ positions could be transferred to ____________ by the Clearing Corporation.
✔ Another solvent member
✘ The Exchange
✘ A suspense account
✘ Error account
Question 25: Clients' positions cannot be netted off against each other while calculating initial margin on the derivatives segm
✔ True
✘ False
Question 26: Mark-to-market margins are collected:
✔ On a daily basis
✘ On a weekly basis
Question 27: Value-at-risk measures
✘ Value of proprietary portfolio
✔ Risk level of a financial portfolio
✘ Net-worth of an investor
✘ Credit rating of an investor
Question 28: A penalty or suspension of registration of a stock broker from derivatives exchange/ segment under the
SEBI (Stock Broker and Sub-broker) Regulations, 1992 can take place if
✘ The stock broker fails to pay fees
✘ The stock broker violates the conditions of registration
✘ The stock broker is suspended by the stock exchange
✔ In any of the above situations
Question 29: On the Clearing Council of the Clearing Corporation of the derivatives segment, broker-members are allowed.
✘ True
✔ False
Question 30: Initial margin collection is monitored by the
✘ RBI
✘ SEBI
✔ Clearing Corporation
