Test 2 derivatives
A deferred swap is also called a European swap.
Fales
A bank's duration gap equals the duration of its assets minus the duration of its liabilities.
False
A business that needs a particular commodity in the near futures could logically use a short hedge to get it
False
A combined interest rate and currency swap is known as a clown swap
False
A portfolio of stock combined with a long position in futures can become a Treasury bill equivalent
False
According to one market survey the most common corporate use of derivatives is to access foreign equity markets.
False
An interest rate cap contains on or more caplets and at least one floorlet.
False
An interest rate cap is more similar to a put option than to a call option
False
An interest rate collar is the simultaneous holding of a long cap and a long floor.
False
Changes in the treasury bill rate do not usually affect the basis in a stock index futures contract.
False
Delivery of stock certificates on the S&P 500 stock index futures contract occurs via wire transfer of the shares than physical delivery.
False
Foreign exchange risk represents the chance of default by a foreign lender.
False
Forward contracts are marked to market in the same manner as a futures contract
False
Futures Markets typically work best when there are relatively few speculators.
False
Futures contracts are marked to market weekly
False
If a currency weakens relative to another, it buys more of the foreign currency.
False
Most stock index futures contracts trade at the New York Stock Exchange
False
Nearly 65% of global stock market capitalization comes from the United States.
False
Open interest is a measure of how many contracts traded on a particular day
False
The first payment on an interest rate swap is based on the principal amount , while the last payment is based on the notional amount.
False
The swap buyer pays the floating rate.
False
The swap clearinghouse serves the same purpose as the Option Clearing Corporation with listed options.
False
The swap tenor refers to the fixed interest rate.
False
To take advantage of differentials in the credit market, a firm should borrow in the market in which it has an absolute advantage rather than a comparative advantage.
False
Unlike options, a futures spread is usually riskier than a single futures position
False
A change in a country's interest rates usually results in a change in the forward discount or premium of that country's currency on the global market.
True
A direct foreign exchange quotation is the inverse of and indirect foreign exchange quotation.
True
A firm that writes a floor will probably have to pay out cash if interest rates decline sharply.
True
A forward contract is more similar to a futures contract than an options contract
True
A forward exchange rate may be more or less than the spot exchange.
True
A major difference between a currency swap and an interest rate swap is that principal is exchanged in a currency swap while it is not in a interest rate swap.
True
A payer swaption gives its owner the right to pay the fixed rate.
True
A plain vanilla interest rate swap is sometimes called a fixed for floating rate swap.
True
A portfolio manager is more concerned with economic foreign exchange exposure than with accounting foreign exchange exposure.
True
A trader who receives a market variation call has one hour to put money into his or her account
True
All Participants in the futures market must post a good-faith deposit on which they can earn interest
True
An SPX hedge ratio accounts for both risk and size differentials.
True
As time passes the basis of a stock index futures contract approaches zero.
True
Basis is the difference between the futures price and the cash price
True
Forward rates reflect differences in national interest rates.
True
If a futures contract is limit up, trading essentially stops for the day
True
If a trader has an out trade, he or she receives an unmatched trade notice
True
In some respects, speculators perform the same function as insurance companies
True
In the market maker system at the futures exchanges, trades occur by open currency
True
Program trading relies on computerized trades via the Super-DOT system
True
Property rights cannot be transferred with futures contracts
True
Purchasing power parity states that in a world of perfect markets the same good should sell for the same price in different countries.
True
Putting on a crush involves buying soybeans and selling soybean oil and meal
True
Rather than having an expiration date like an option, a futures contract has a delivery date.
True
Scalpers provide liquidity to the market
True
The S&P 500 stock index is capitalization-weighted
True
The SPX futures contract size is $250 times the index level.
True
The concept of normal backwardation suggests that the future cash price will be slightly higher than predicted by expectations hypothesis
True
The futures market is not designed to provide protection against crop failure
True
The futures price for a stock index futures contract is usually grater than the cash index.
True
The interest rate parity theorem states that differences in national interest rates will be reflected in the currency forward market.
True
The modern swaps market is less than 30 years old
True
The nominal rate equals the real rate plus a risk premium plus an inflation premium
True
The spot price is the same as the cash price for a currency.
True
The term exchange of borrowings normally refers to a currency swap rather than an interest rate.
True
Unexpected inflation causes the value of the home currency to fall.
True
The Securities and Exchange Commission regulates commodities trading
false