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10 MCQs

The document contains a series of questions related to derivatives in financial markets, including definitions, types, and purposes of various derivative instruments. It also addresses regulatory bodies in India and risks associated with forward contracts. The questions are categorized by difficulty and include multiple-choice options for answers.

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Ankit Srivastava
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97 views5 pages

10 MCQs

The document contains a series of questions related to derivatives in financial markets, including definitions, types, and purposes of various derivative instruments. It also addresses regulatory bodies in India and risks associated with forward contracts. The questions are categorized by difficulty and include multiple-choice options for answers.

Uploaded by

Ankit Srivastava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Question

What is a derivative in financial markets?


Which of the following is NOT a type of derivative?
What is the main purpose of hedging in the derivatives market?
Which of the following statements about forward contracts is TRUE?
Which type of derivative gives the holder the right but not the obligation to buy or sell an asset?
In the Indian derivatives market, which organization regulates forward contracts?
What is the key difference between futures and forward contracts?
What is the primary risk associated with forward contracts?
Which financial instrument allows parties to exchange cash flows based on a predetermined formula?
In a futures contract, what is the purpose of the margin requirement?
Option A
A financial instrument based on an underlying asset
Futures
To eliminate all financial risks
They are standardized and traded on exchanges
Futures contract
Reserve Bank of India (RBI)
Futures are standardized and traded on exchanges, while forwards are customized and traded OTC
Market risk
Options
To ensure immediate settlement
Option B Option C
A type of equity share A short-term government bond
Options Stocks
To make guaranteed profits To manage and reduce financial risk
They are customized and traded over-the-counter They cannot be settled before maturity
Forward contract Options contract
Securities and Exchange Board of India (SEBI) Forward Markets Commission (FMC)
Forwards are riskier than futures Futures require no margin deposits
Liquidity risk Counterparty risk
Futures Swaps
To cover potential losses and maintain financial integrTo prevent early contract termination
Option D
A company’s annual revenue
Forwards
To increase exposure to market fluctuations
They are regulated by SEBI in India
Swap contract
Ministry of Finance
Forward contracts are only used by individual investors
Regulatory risk
Bonds
To increase speculative trading
Difficulty CO
Easy CO1
Easy CO1
Moderate CO1
Moderate CO1
Moderate CO1
Difficult CO1
Difficult CO1
Difficult CO1
Difficult CO1
Difficult CO1

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