Question 1

When a call futures is exercised, the holder of the call acquires: choose one)

Accepted Answer

A)  A long position in the futures contract 
B)  A short position in the futures contract 
C)  A long position in the underlying asset 
D)  None of the above 
A)  A long position in the futures contract 
B)  A short position in the futures contract 
C)  A long position in the underlying asset 
D)  None of the above A

Question 2

A futures-style option is: choose one)

Accepted Answer

A)  An option on a futures 
B)  An option on spot with daily settlement 
C)  A futures contract on an option payoff 
D)  None of the above 
A)  An option on a futures 
B)  An option on spot with daily settlement 
C)  A futures contract on an option payoff 
D)  None of the above C

Question 3

The risk-free rate is 5% and the dividend yield on the S&P/ASX 200 Index is 2%. Which of the following is correct when a futures option on the index is being valued? choose one)

Accepted Answer

A)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 5%. 
B)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 2%. 
C)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 3%. 
D)  The futures price of the S&P/ASX 200 can be treated like a non-dividend-paying stock. 
A)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 5%. 
B)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 2%. 
C)  The futures price of the S&P/ASX 200 can be treated like a stock paying a dividend yield of 3%. 
D)  The futures price of the S&P/ASX 200 can be treated like a non-dividend-paying stock. A

Question 4

Which two of the following are true when futures prices exceed spot prices? choose two)

Accepted Answer

A)  American call options on futures are worth more than the corresponding American call option on spot. 
B)  American call options on futures are worth less than the corresponding American call option on spot. 
C)  American put options on futures are worth more than the corresponding American put option on spot. 
D)  American put options on futures are worth less than the corresponding American put option on spot. 
A)  American call options on futures are worth more than the corresponding American call option on spot. 
B)  American call options on futures are worth less than the corresponding American call option on spot. 
C)  American put options on futures are worth more than the corresponding American put option on spot. 
D)  American put options on futures are worth less than the corresponding American put option on spot.

Question 5

When a put futures is exercised, the holder of the put acquires: choose one)

Accepted Answer

A)  A long position in the futures contract 
B)  A short position in the futures contract 
C)  A long position in the underlying asset 
D)  None of the above 
A)  A long position in the futures contract 
B)  A short position in the futures contract 
C)  A long position in the underlying asset 
D)  None of the above

Question 6

A futures price is currently 40 cents. It is expected to move up to 44 cents or down to 34 cents in the next six months. The risk-free interest rate is 6% with continuous compounding.
i) What is the probability of an up movement in a risk-neutral world? _ _ _ _ _ _
ii) What is the value of a six-month put option with a strike price of 37 cents? Give two decimal places.) _ _ _ _ _ _
iii) What is the value of a six-month call with a strike price of 33 cents? Give two decimal places.) _ _ _ _ _ _

Accepted Answer

i): 0.6 
i

Question 7

Which of the following is not true? choose one)

Accepted Answer

A)  Black's model can be used to value an American-style option on futures. 
B)  Black's model can be used to value a European-style option on futures. 
C)  Black's model can be used to value a European-style option on spot. 
D)  Black's model is widely used by practitioners. 
A)  Black's model can be used to value an American-style option on futures. 
B)  Black's model can be used to value a European-style option on futures. 
C)  Black's model can be used to value a European-style option on spot. 
D)  Black's model is widely used by practitioners.

When a call futures is exercised, the holder of the call acquires: choose one)

A futures-style option is: choose one)

The risk-free rate is 5% and the dividend yield on the S&P/ASX 200 Index is 2%. Which of the following is correct when a futures option on the index is being valued? choose one)

Which two of the following are true when futures prices exceed spot prices? choose two)

When a put futures is exercised, the holder of the put acquires: choose one)

Which of the following is not true? choose one)

Introduction

Mechanics of Futures Markets

Hedging Strategies Using Futures

Interest Rates

Determination of Forward and Futures Prices

Interest Rate Futures 7 Swaps

Swaps

Securitization and the Credit Crisis of 2007

Mechanics of Options Markets

Properties of Stock Options

Trading Strategies Involving Options

Introduction to Binomial Trees

Valuing Stock Options: the Black-Scholes-Merton Model

Employee Stock Options

Options on Stock Indices and Currencies

The Greek Letters

Binomial Trees in Practice

Volatility Smiles

Value at Risk

Interest Rate Options

Exotic Options and Other Non-Standard Products

Credit Derivatives

Weather, Energy and Insurance Derivatives

Filters

Exam 16: Futures Options

When a call futures is exercised, the holder of the call acquires: choose one)

A futures-style option is: choose one)

The risk-free rate is 5% and the dividend yield on the S&P/ASX 200 Index is 2%. Which of the following is correct when a futures option on the index is being valued? choose one)

Which two of the following are true when futures prices exceed spot prices? choose two)

When a put futures is exercised, the holder of the put acquires: choose one)

Which of the following is not true? choose one)

Introduction

Mechanics of Futures Markets

Hedging Strategies Using Futures

Interest Rates

Determination of Forward and Futures Prices

Interest Rate Futures 7 Swaps

Swaps

Securitization and the Credit Crisis of 2007

Mechanics of Options Markets

Properties of Stock Options

Trading Strategies Involving Options

Introduction to Binomial Trees

Valuing Stock Options: the Black-Scholes-Merton Model

Employee Stock Options

Options on Stock Indices and Currencies

The Greek Letters

Binomial Trees in Practice

Volatility Smiles

Value at Risk

Interest Rate Options

Exotic Options and Other Non-Standard Products

Credit Derivatives

Weather, Energy and Insurance Derivatives

Filters