Exam 14: Risk Management With Financial Derivatives

If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of treasury securities should interest rates rise,he could ________.

The main advantage of using options on futures contracts rather than the futures contracts themselves is that ________.

If you buy in February a bond future contract for 120 that matures on June 30 of the same year,and at the maturity date the same future sells for 110,you have a ________ of $________.

If you sell in February a bond future contract for 120 that matures on June 30 of the same year,and at the maturity date the same future sells for 110,you have a ________ of $________.

If you sell in February a bond future contract for 125 that matures on June 30 of the same year,and at the maturity date the same future sells for 105,you have a ________ of $________.

When a financial institution hedges the interest-rate risk for a specific asset,the hedge is called a ________.

Futures differ from forwards because they are ________.

If you sell in March a bond future contract for 115 that matures on June 30 of the same year,and at the maturity date the same future sells for 110,you have a ________ of $________.

Financial derivatives include ________.

If you buy a European call option on Canada bonds with a strike price of 110 assuming that the premium is $0,and on the maturity date the market price of Canada bonds is 103,you will ________ the option and potentially make a profit of $________.

The seller of an option has the ________.

Futures differ from forwards because they are ________.

If you sell in March a bond future contract for 110 that matures on June 30 of the same year,and at the maturity date the same future sells for 125,you have a ________ of $________.

Which of the following features of futures contracts were not designed to increase liquidity?

If a bank has a gap of -$10 million,it can reduce its interest rate risk by ________.

If you buy in February a bond future contract for 125 that matures on June 30 of the same year,and at the maturity date the same future sells for 105,you have a ________ of $________.

If you buy in April a stock index future contract on the S&P 500 index at the price of 1000 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 900,you have a ________ of $________.

Options are contracts that give the purchasers the ________.

Forward contracts do not suffer from the problem of ________.

If you sold a short futures contract,you will hope that bond prices ________.