Exam 14: Risk Management With Financial Derivatives

If a money manager believes stock prices will fall and knows that a block of funds will be received in the future,then he should ________.

The main reason to buy an option on a futures contract rather than buying the futures contract is ________.

An option that gives the owner the tight to sell a financial instrument at the exercise price within a specified period of time is a(n)________.

If you sell 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 $________.

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

The number of contracts outstanding in a particular financial future is the ________.

If you buy a European call option on Canada bonds with a strike price of 120 assuming that the premium is $0,and on the maturity date the market price of Canada bonds is 123,you will ________ the option in order to make a profit of $________.

A contract that requires the investor to sell securities on a future date is called a ________.

Intermediaries are active in the swap markets because ________.

When the financial institution is hedging interest-rate risk on its overall portfolio,then the hedge is a ________.

The price specified in an option contract at which the holder can buy or sell the underlying asset is called the ________.

Credit options are contracts where the purchaser gains the right to receive profits that are tied to ________.

Why have options on financial futures become the most widely traded option contracts?

Options on futures contracts are referred to as ________.

If you sell in April a stock index future contract on the S&P 500 index at the price of 1050 points that matures on June 30 of the same year and on the maturity date the S&P 500 Index is at 1047,you have a ________ of $________.

If a firm is due to be paid in euros in two months,to hedge against exchange rate risk the firm should ________.

if you sell a futures contract on the S&P 500 Index at a price of 450 and the index rises to 500,you will ________.

The elimination of riskless profit opportunities in the futures market is referred to as ________.

All other things held constant,premiums on put options will increase when the ________.

Explain using an example the statement that "at the expiration date of a futures contract,the price of the contract is the same as the price of the underlying asset to be delivered."