Examen 2. Etapa 1 Derivatives

A manufacturing company enters into a forward contract to sell foreign currency received from exports at a fixed exchange rate. This use of derivatives is best described as:

The cost of carry for a financial asset held in a forward contract is most accurately described as including:

A put option with an exercise price of $45 is written on a stock currently trading at $48. The option is best described as:

Put-call forward parity differs from standard put-call parity in that it replaces the spot price of the underlying with:

Which of the following positions most likely creates an obligation for the holder to buy an underlying asset at a specified price on a future date?

An investor writes a put option with an exercise price of $60 and receives a premium of $5. At expiration, the underlying asset is priced at $52. The writer’s profit is closest to:

If a derivative is priced above its no-arbitrage value, an arbitrageur would most likely:

During the life of a forward contract, as the spot price of the underlying asset increases, the value of the long forward position will most likely:

A portfolio manager holds a European put option and the underlying stock. According to put-call parity, this portfolio is equivalent to:

In a one-period binomial model, if the risk-neutral probability of an up move is 0.60, the option pays $12 in the up state and $0 in the down state, and the risk-free rate is 4% per period, the value of the option today is closest to:

A credit default swap (CDS) is best described as a derivative in which the protection buyer:

A stock is currently priced at $80 and pays no dividends. The risk-free rate is 4% per year. The no-arbitrage forward price for a 1-year forward contract on the stock is closest to:

On a given day, a futures contract and an otherwise identical forward contract on the same asset have the same price. The next day, the asset price rises sharply. The futures contract holder’s position will most likely:

Six months after initiation, the fixed rate on a plain vanilla interest rate swap is above current market swap rates for the same remaining maturity. The value of the fixed-rate payer position is most likely:

All else equal, an increase in the volatility of the underlying asset will most likely:

In a one-period binomial model, a stock is priced at $50. In one period it will either rise to $65 or fall to $40. The risk-free rate is 3% per period. A call option with exercise price $55 pays $10 in the up state and $0 in the down state. The hedge ratio (delta) of this option is closest to:

The daily settlement process in futures markets is best described as transferring:

The ‘price’ of an interest rate swap is best described as:

A fixed-rate bond issuer enters into a pay-floating, receive-fixed interest rate swap. The issuer’s combined position (bond + swap) is most similar to:

A clearinghouse in exchange-traded derivative markets serves primarily to: