Exam 13: Financial Futures Markets

The initial margin of a futures contract is typically between ____ percent of a futures contract's full value.

  _________ take positions in financial futures to reduce their exposure to future movements in interest rates or stock prices; ________ commonly take the opposite position and thus serve as counterparties on many transactions.

Speculators in futures contracts that normally maintain their futures positions for extended periods of time (such as weeks or months)are referred to as

Financial futures contracts on stock indexes are referred to as interest rate futures.

Since stock index futures prices are primarily driven by movements in the corresponding stock indexes, participants in stock index futures monitor indicators that may signal changes in the stock indexes.

A(n)____ is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date.

Settlement of stock index futures contracts occurs through delivery of the underlying securities.

Cross-hedging with Treasury bond futures is primarily intended to protect against credit (default)risk of securities.

Assume that a T-bill futures contract with a face value of $1 million is purchased at a price of $95.00 per $100 face value. At settlement, the price of T-bills is $95.50. What is the difference between the selling and purchase price of the futures contract?

The prices of stock index futures

Which of the following statements is incorrect?

Interest rate futures are not available on

___________ involves the buying or selling of stock index futures with a simultaneous opposite position in the stocks that the index comprises.

Assume that a bank obtains most of its funds from large CDs with a five-year maturity. Its assets are in the form of loans with rates that adjust every six months. The bank would be ____ affected if interest rates decline. To partially hedge its position, it could ____ interest rate futures contracts.

The actions of numerous institutional investors to sell stock index futures instead of selling stocks to prepare for a market decline would likely cause the index futures price to be

If speculators believe interest rates will ____, they would consider ____ a T-bill futures contract today.

Companies with international trade can hedge ____ by ____ currency futures.

If there are ____ traders with buy offers than sell offers for a particular contract, the futures price will ____ until this imbalance is removed.

Dynamic asset allocation involves the switching between risky and low-risk investments by institutional investors over time in response to changing expectations.

Speculators who normally close out their futures positions on the same day that the positions were initiated are referred to as