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Question 1 of 30
1. Question
Security futures, which have been authorized by Congress, can be bought and sold for which of the following?
I. Price risk management
II. Speculative purposes
III. Trading vehicles
IV. Asset managementCorrect
Security futures, which have been authorized by Congress, can be bought and sold for either price risk management or for speculative purposes
Incorrect
Security futures, which have been authorized by Congress, can be bought and sold for either price risk management or for speculative purposes
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Question 2 of 30
2. Question
Which of the following is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price?
Correct
A security futures contract is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price
Incorrect
A security futures contract is a legally binding agreement between two parties to purchase or sell in the future a specific quantity of shares of a single equity security or narrow-based securities index, at a certain price
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Question 3 of 30
3. Question
A futures contract specifies must state which of the following?
I. The item being bought and sold
II. The standardized contract size
III. The contract month
IV. The manner of settlementCorrect
A futures contract specifies:
• The item being bought and sold.
• The standardized contract size
• The contract month
• The manner of settlementIncorrect
A futures contract specifies:
• The item being bought and sold.
• The standardized contract size
• The contract month
• The manner of settlement -
Question 4 of 30
4. Question
Security futures prices are determined why which of the following?
I. Through continuous competitive bidding among buyers and sellers
II. Bidding by open outcry on a trading floor
III. Bidding through electronic order matching
IV. Through transactions of specified demands through buyers and sellersCorrect
Security futures prices are determined the same way stock prices are determined— through continuous competitive bidding among buyers and sellers. This may be conducted either by open outcry on a trading floor or through electronic order matching
Incorrect
Security futures prices are determined the same way stock prices are determined— through continuous competitive bidding among buyers and sellers. This may be conducted either by open outcry on a trading floor or through electronic order matching
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Question 5 of 30
5. Question
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on which of the following basis?
Correct
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on a daily basis, following the close of that day’s trading activity.
Incorrect
Buyers’ and sellers’ gains or losses are credited or debited to their accounts on a daily basis, following the close of that day’s trading activity.
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Question 6 of 30
6. Question
Which of the following statements with regards to leverage is not true?
Correct
Leverage is a feature whose risks are the mirror image of its potential benefits. Leverage is frequently, and accurately, described as a “two-edged sword.”
Leverage exists because the margin deposit needed to buy or sell a futures contract is only a portion of the current market value of the contract.
Leverage is also possible in securities trading, but to a more limited extent.
Incorrect
Leverage is a feature whose risks are the mirror image of its potential benefits. Leverage is frequently, and accurately, described as a “two-edged sword.”
Leverage exists because the margin deposit needed to buy or sell a futures contract is only a portion of the current market value of the contract.
Leverage is also possible in securities trading, but to a more limited extent.
-
Question 7 of 30
7. Question
Subject to the limitations in Section 2 of Articles of Incorporation, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by which of the following?
I. Providing such regulatory services to such markets as the Board may from time to time approve
II. The adoption, administration and enforcement of common business interests
III. Relieving the Commission from the substantial burden of direct regulation in such matters
IV. Undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this ArticleCorrect
Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by
(i) undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this Article;
(ii) relieving the Commission from the substantial burden of direct regulation in such matters; and
(iii) providing such regulatory services to such markets as the Board may from time to time approve.
Incorrect
Subject to the limitations in Section 2 of this Article, the fundamental purposes of NFA are to promote the improvement of business conditions and the common business interests of persons engaged in commodity futures and swaps or related activity by
(i) undertaking the regulation of persons that are members of NFA (hereinafter “Members”) as set forth in this Article;
(ii) relieving the Commission from the substantial burden of direct regulation in such matters; and
(iii) providing such regulatory services to such markets as the Board may from time to time approve.
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Question 8 of 30
8. Question
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with which of the following?
I. Commission as a Futures Commission Merchant
II. Commodity Pool Operator
III. Commodity Trading Advisor
IV. Introducing Broker or Leverage Transaction MerchantCorrect
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with the Commission as a Futures Commission Merchant, Commodity Pool Operator, Commodity Trading Advisor, Introducing Broker or Leverage Transaction Merchant and that is acting in respect to the account, order, or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person.
Incorrect
The prohibition of Members from carrying accounts, accepting orders, or handling transactions, in commodity futures contracts, for or on behalf of any non-Member, or suspended Member, that is required to be registered with the Commission as a Futures Commission Merchant, Commodity Pool Operator, Commodity Trading Advisor, Introducing Broker or Leverage Transaction Merchant and that is acting in respect to the account, order, or transaction for a customer, a commodity pool or participant therein, a client of a commodity trading advisor, or any other person.
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Question 9 of 30
9. Question
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless?
I. such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board
II. such suspended Member is exempted from this prohibition by the Board or a committee thereof
III. such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board
IV. such suspended Member is exempted from this prohibition by the Board or a committee thereofCorrect
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless
(i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or
(ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.
Incorrect
The prohibition of Members from accepting orders in commodity futures contracts to cover leverage transactions, for or on behalf of any non-Member, or suspended Member that is required to be registered with the Commission as a Leverage Transaction Merchant, unless
(i) such non-Member is a member of another futures association registered under Section 17 of the Act or is exempted from this prohibition by the Board or
(ii) such suspended Member is exempted from this prohibition by the Board or a committee thereof.
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Question 10 of 30
10. Question
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate which of the following?
I. The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
II. Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
III. Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
IV. The terms or conditions of any futures contract.Correct
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate any of the following:
(i) The minimum level of margin required for any futures or swaps contract or type of futures or swaps transaction, the method for calculation thereof, or compliance therewith, unless such rule, standard, requirement or procedure conforms and is not inconsistent with applicable Contract Market requirements.
(ii) Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
(iii) The rights, privileges, duties or responsibilities of membership in any Contract Market or Clearing Organization.
(iv) The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
(v) The conduct of business or other activities on the trading floor of a Contract Market.
(vi) The terms or conditions of any futures contract.
(vii) The terms or conditions of any swaps contract; provided that such terms or conditions conform to and are not inconsistent with applicable Contract Market requirements.
Incorrect
NFA shall not adopt, administer or enforce upon any Member or Associate a rule, standard, requirement or procedure which purports to govern or otherwise regulate any of the following:
(i) The minimum level of margin required for any futures or swaps contract or type of futures or swaps transaction, the method for calculation thereof, or compliance therewith, unless such rule, standard, requirement or procedure conforms and is not inconsistent with applicable Contract Market requirements.
(ii) Eligibility for membership in, clearing privileges on, or service on the governing board or committees of, a Contract Market.
(iii) The rights, privileges, duties or responsibilities of membership in any Contract Market or Clearing Organization.
(iv) The content, interpretation, administration or enforcement of any rule, standard, requirement or procedure of a Contract Market or Clearing Organization.
(v) The conduct of business or other activities on the trading floor of a Contract Market.
(vi) The terms or conditions of any futures contract.
(vii) The terms or conditions of any swaps contract; provided that such terms or conditions conform to and are not inconsistent with applicable Contract Market requirements.
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Question 11 of 30
11. Question
The Risk Management Program must include policies and procedures to monitor and manage which of the following risks?
I. Market Risk
II. Credit Risk
III. Legal Risk
IV. Asset RiskCorrect
The Risk Management Program must include policies and procedures to monitor and manage the following risks:
a. Market Risk
b. Credit Risk
c. Liquidity Risk
d. Foreign Currency Risk
e. Legal Risk
f. Operational Risk
g. Counterparty Risk
h. Liabilities to Retail Forex Customers Risk
j. Capital RiskIncorrect
The Risk Management Program must include policies and procedures to monitor and manage the following risks:
a. Market Risk
b. Credit Risk
c. Liquidity Risk
d. Foreign Currency Risk
e. Legal Risk
f. Operational Risk
g. Counterparty Risk
h. Liabilities to Retail Forex Customers Risk
j. Capital Risk -
Question 12 of 30
12. Question
Market Risk shall take into account the following except?
Correct
Market Risk shall take into account, among other things, for all counterparties (i.e., ECP and Non-ECP) the daily measurement of market exposure, volatility of prices, basis and correlation risks, leverage, sensitivity of option positions (if applicable), and position concentration to comply with market risk tolerance limits
Incorrect
Market Risk shall take into account, among other things, for all counterparties (i.e., ECP and Non-ECP) the daily measurement of market exposure, volatility of prices, basis and correlation risks, leverage, sensitivity of option positions (if applicable), and position concentration to comply with market risk tolerance limits
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Question 13 of 30
13. Question
Credit Risk shall take into account, among other things, for all counterparties to do which of the following?
I. Monitoring and reporting violations of counterparty customer credit limits performed by persons independent of the business trading unit
II. The firm’s process for monitoring and adjusting security deposit requirements imposed upon all counterparty customers
III. Regular valuation of collateral used to cover credit exposures and safeguarding of collateral
IV. The daily measurement of overall credit exposure to comply with forex counterparty credit limitsCorrect
Credit Risk shall take into account, among other things, for all counterparties the daily measurement of overall credit exposure to comply with forex counterparty credit limits; monitoring and reporting violations of counterparty customer credit limits performed by persons independent of the business trading unit; the firm’s process for monitoring and adjusting security deposit requirements imposed upon all counterparty customers; and regular valuation of collateral (including appropriate haircuts) used to cover credit exposures and safeguarding of collateral.
Incorrect
Credit Risk shall take into account, among other things, for all counterparties the daily measurement of overall credit exposure to comply with forex counterparty credit limits; monitoring and reporting violations of counterparty customer credit limits performed by persons independent of the business trading unit; the firm’s process for monitoring and adjusting security deposit requirements imposed upon all counterparty customers; and regular valuation of collateral (including appropriate haircuts) used to cover credit exposures and safeguarding of collateral.
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Question 14 of 30
14. Question
Liquidity Risk shall take into account, among other things, the daily measurement of liquidity needs such as?
I. Risks presented by prime brokers and/or liquidity providers
II. Procedures for liquidating all non-cash collateral in a timely manner
III. Procedures for liquidating all non-cash collateral without significant effect on price and application of appropriate collateral haircuts that accurately reflect market and credit risk
IV. Position concentration to comply with market risk tolerance limitsCorrect
Liquidity Risk shall take into account, among other things, the daily measurement of liquidity needs, risks presented by prime brokers and/or liquidity providers, and, if applicable, procedures for liquidating all non-cash collateral in a timely manner and without significant effect on price and application of appropriate collateral haircuts that accurately reflect market and credit risk.
Incorrect
Liquidity Risk shall take into account, among other things, the daily measurement of liquidity needs, risks presented by prime brokers and/or liquidity providers, and, if applicable, procedures for liquidating all non-cash collateral in a timely manner and without significant effect on price and application of appropriate collateral haircuts that accurately reflect market and credit risk.
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Question 15 of 30
15. Question
Which of the following risks takes into account, among other things, the daily measurement of the amount of capital exposed to fluctuations in the value of foreign currency to comply with applicable limits and the establishment of safeguards against adverse currency fluctuations?
Correct
Foreign Currency Risk shall take into account, among other things, the daily measurement of the amount of capital exposed to fluctuations in the value of foreign currency to comply with applicable limits and the establishment of safeguards against adverse currency fluctuations.
Incorrect
Foreign Currency Risk shall take into account, among other things, the daily measurement of the amount of capital exposed to fluctuations in the value of foreign currency to comply with applicable limits and the establishment of safeguards against adverse currency fluctuations.
-
Question 16 of 30
16. Question
Legal Risk shall take into account, among other things, the determination that any transaction and netting arrangements entered into have which of the following?
I. account opening documents are properly completed
II. a sound legal basis
III. account opening documents have adequate risk disclosure provided
IV. an evaluation of what impact any potential litigation may have upon firm capitalCorrect
Legal Risk shall take into account, among other things, the determination that any transaction and netting arrangements entered into have a sound legal basis, account opening documents are properly completed and adequate risk disclosure provided, and an evaluation of what impact any potential litigation may have upon firm capital.
Incorrect
Legal Risk shall take into account, among other things, the determination that any transaction and netting arrangements entered into have a sound legal basis, account opening documents are properly completed and adequate risk disclosure provided, and an evaluation of what impact any potential litigation may have upon firm capital.
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Question 17 of 30
17. Question
Operational Risk shall take into account the following except?
Correct
Operational Risk shall take into account, among other things, secure and reliable operating and information systems with adequate, scalable capacity and independence from the business trading unit; safeguards to detect, identify and promptly correct deficiencies in the operating and information systems; automated financial and risk management controls reasonably designed to prevent the placing of erroneous trades, including those that exceed pre-set capital, credit or volume thresholds; and reconciliation of all data and information in operating and information systems.
Incorrect
Operational Risk shall take into account, among other things, secure and reliable operating and information systems with adequate, scalable capacity and independence from the business trading unit; safeguards to detect, identify and promptly correct deficiencies in the operating and information systems; automated financial and risk management controls reasonably designed to prevent the placing of erroneous trades, including those that exceed pre-set capital, credit or volume thresholds; and reconciliation of all data and information in operating and information systems.
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Question 18 of 30
18. Question
Counterparty Risk shall take into account which of the following risks?
I. Settlement risks
II. Pricing risks associated with offsetting the FDM’s forex positions with counterparties
III. Operational risks
IV. Credit risksCorrect
Counterparty Risk shall take into account, among other things, all risks including but not limited to, settlement risks, pricing risks associated with offsetting the FDM’s forex positions with counterparties, including different prime brokers, banks and other FDMs.
Incorrect
Counterparty Risk shall take into account, among other things, all risks including but not limited to, settlement risks, pricing risks associated with offsetting the FDM’s forex positions with counterparties, including different prime brokers, banks and other FDMs.
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Question 19 of 30
19. Question
Liabilities to Retail Forex Customers Risk shall take into account, among other things, the process to ensure that the FDM has sufficient assets to cover the amount owed to retail forex customers on a daily basis. This process must include the following except?
Correct
Liabilities to Retail Forex Customers Risk shall take into account, among other things, the process to ensure that the FDM has sufficient assets to cover the amount owed to retail forex customers on a daily basis. This process must include:
a separation of duties among individuals responsible for advising customers on trading activities, approving or overseeing customer cash receipts and disbursements and recordkeeping and reporting financial transactions;
a method for ensuring the firm is accurately computing its liability to retail forex customers and accurately monitoring and valuing the funds used to cover the liability to retail forex customers;
a method for evaluating on a continued basis the depositories used to hold funds used to cover the amount owed to retail forex customers including ensuring that the depositories meet specified criteria relating to the depository’s capitalization, creditworthiness, operational reliability and access to liquidity, as well as the requirements of CFTC Regulation 5.8 and NFA Financial Requirements Section 14;
a method for assessing the appropriateness of specific investments of funds used to cover the liability to retail forex customers in permitted investments under CFTC Regulation 1.25; and
the timely recording of all transactions, including transactions impacting retail forex customers’ accounts, in the FDM’s books and records.Incorrect
Liabilities to Retail Forex Customers Risk shall take into account, among other things, the process to ensure that the FDM has sufficient assets to cover the amount owed to retail forex customers on a daily basis. This process must include:
a separation of duties among individuals responsible for advising customers on trading activities, approving or overseeing customer cash receipts and disbursements and recordkeeping and reporting financial transactions;
a method for ensuring the firm is accurately computing its liability to retail forex customers and accurately monitoring and valuing the funds used to cover the liability to retail forex customers;
a method for evaluating on a continued basis the depositories used to hold funds used to cover the amount owed to retail forex customers including ensuring that the depositories meet specified criteria relating to the depository’s capitalization, creditworthiness, operational reliability and access to liquidity, as well as the requirements of CFTC Regulation 5.8 and NFA Financial Requirements Section 14;
a method for assessing the appropriateness of specific investments of funds used to cover the liability to retail forex customers in permitted investments under CFTC Regulation 1.25; and
the timely recording of all transactions, including transactions impacting retail forex customers’ accounts, in the FDM’s books and records. -
Question 20 of 30
20. Question
Which of the following statements with regards to the Risk Management Program is/are true?
I. The Risk Management Program must also set risk tolerance limits for each of the risk elements above and discuss the underlying methodology used in setting these limits
II. The Risk Management Program must include policies and procedures for detecting breaches of risk tolerance limits set by the FDM and alerting supervisors within the risk management unit and senior management
III. As part of the Risk Management Program, the FDM must conduct stress tests under extreme but plausible conditions of all positions in the proprietary account and in each counterparty account at least on a semi-monthly basis.
IV. The Risk Management Program must also consider all risks posed by the FDM’s affiliates, including the risks affiliates pose when the FDM functions as the primary risk manager and/or liquidity provider for affiliates, the FDM’s other business lines and any other trading activity engaged in by the FDM.Correct
The Risk Management Program must also set risk tolerance limits for each of the risk elements above and discuss the underlying methodology used in setting these limits
The Risk Management Program must include policies and procedures for detecting breaches of risk tolerance limits set by the FDM and alerting supervisors within the risk management unit and senior management
As part of the Risk Management Program, the FDM must conduct stress tests under extreme but plausible conditions of all positions in the proprietary account and in each counterparty account at least on a semi-monthly basis.
The Risk Management Program must also consider all risks posed by the FDM’s affiliates, including the risks affiliates pose when the FDM functions as the primary risk manager and/or liquidity provider for affiliates, the FDM’s other business lines and any other trading activity engaged in by the FDM.Incorrect
The Risk Management Program must also set risk tolerance limits for each of the risk elements above and discuss the underlying methodology used in setting these limits
The Risk Management Program must include policies and procedures for detecting breaches of risk tolerance limits set by the FDM and alerting supervisors within the risk management unit and senior management
As part of the Risk Management Program, the FDM must conduct stress tests under extreme but plausible conditions of all positions in the proprietary account and in each counterparty account at least on a semi-monthly basis.
The Risk Management Program must also consider all risks posed by the FDM’s affiliates, including the risks affiliates pose when the FDM functions as the primary risk manager and/or liquidity provider for affiliates, the FDM’s other business lines and any other trading activity engaged in by the FDM. -
Question 21 of 30
21. Question
Exchange rate exposures include the following except?
Correct
Exchange rate exposures
1. Translation exposure
2. Transaction exposure
3. Economic exposureIncorrect
Exchange rate exposures
1. Translation exposure
2. Transaction exposure
3. Economic exposure -
Question 22 of 30
22. Question
Hedging foreign exchange rate risk needs to take into account on which of the following?
I. Trading in forward looking market instruments such as forwards, futures, options or swaps
II. Invoicing in domestic currency
III. Speeding (slowing) payments of currencies expected to depreciate (appreciate)
IV. Effect of exchange rate changes on future cash flows and market valueCorrect
Hedging foreign exchange rate risk
1. Trading in forward looking market instruments such as forwards, futures, options or swaps
2. Invoicing in domestic currency
3. Speeding (slowing) payments of currencies expected to depreciate (appreciate)Incorrect
Hedging foreign exchange rate risk
1. Trading in forward looking market instruments such as forwards, futures, options or swaps
2. Invoicing in domestic currency
3. Speeding (slowing) payments of currencies expected to depreciate (appreciate) -
Question 23 of 30
23. Question
The following can be considered as part of the exchange rate risks except?
Correct
Exchange rate risks
1. Int’l business is sensitive to exchange rate changes
2. Forward rates are bad predictors of future spot rates
3. 3 concepts of exchange rate exposures for corporationsIncorrect
Exchange rate risks
1. Int’l business is sensitive to exchange rate changes
2. Forward rates are bad predictors of future spot rates
3. 3 concepts of exchange rate exposures for corporations -
Question 24 of 30
24. Question
Real exchange rate is calculated by doing which of the following?
Correct
Real exchange rate is calculated by correcting the nominal exchange rate for price levels in 2 countries
Incorrect
Real exchange rate is calculated by correcting the nominal exchange rate for price levels in 2 countries
-
Question 25 of 30
25. Question
Which of the following is/are the determinants of asset demand?
I. Transaction fees
II. Risk
III. Expected return
IV. LiquidityCorrect
Determinants of asset demand
1. Expected return
2. Risk (uncertainty about rate of return)
3. Liquidity (how easy it is to convert into cash without big transaction costs)Incorrect
Determinants of asset demand
1. Expected return
2. Risk (uncertainty about rate of return)
3. Liquidity (how easy it is to convert into cash without big transaction costs) -
Question 26 of 30
26. Question
Changes in exchange rate include the following except?
Correct
Changes in exchange rate
1. Increase in domestic real interest rate leads to domestic currency appreciation
2. Increase in expected domestic inflation: for given real interest rate, increases nominal return on domestic currency
3. Higher domestic expected inflation reduces expected appreciation of currency
This effect mostly dominates
4. Changes in expected future exchange rates: an increase in this decreases ex-
pected returns of foreign asset, so current exchange rate increases
5. Currency premiumsIncorrect
Changes in exchange rate
1. Increase in domestic real interest rate leads to domestic currency appreciation
2. Increase in expected domestic inflation: for given real interest rate, increases nominal return on domestic currency
3. Higher domestic expected inflation reduces expected appreciation of currency
This effect mostly dominates
4. Changes in expected future exchange rates: an increase in this decreases ex-
pected returns of foreign asset, so current exchange rate increases
5. Currency premiums -
Question 27 of 30
27. Question
A barrier option comes in which of the following types?
I. “Knock-in” option
II. “Knock-out” option
III. “Collateral” option
IV. “Unilateral” optionCorrect
This comes in two types: “knock-in” and “knock-out”. A “knock-in” option is activated when the price of the underlying asset hits a predetermined level known as the “barrier level.” A “knock-out” option becomes null and void when the price of the underlying asset also hits the barrier level
Incorrect
This comes in two types: “knock-in” and “knock-out”. A “knock-in” option is activated when the price of the underlying asset hits a predetermined level known as the “barrier level.” A “knock-out” option becomes null and void when the price of the underlying asset also hits the barrier level
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Question 28 of 30
28. Question
In the U.S., which of the following would be considered as cross rates?
I. USD/JPY
II. USD/GBP
III. CAD/AUD
IV. USD/EURCorrect
This is the exchange rate between any two foreign currencies. In the US, this does not include the U.S. dollar.
Incorrect
This is the exchange rate between any two foreign currencies. In the US, this does not include the U.S. dollar.
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Question 29 of 30
29. Question
Which of the following is/are accurate descriptions of the double barrier option?
I. A “Knock-out” double-barrier option is profitable when the price of the underlying asset remains between the two barriers
II. When the rate is increased, the banks raise the rates of the barrier to cover their increased cost of borrowing.
III. The double barrier option is an exotic option with two barriers that bound the price fluctuation of the underlying asset.
IV. A “Knock-in” double-barrier option is profitable when the price of the underlying asset reaches either one of the barriers.Correct
The double barrier option is an exotic option with two barriers that bound the price fluctuation of the underlying asset. A “Knock-in” double-barrier option is profitable when the price of the underlying asset reaches either one of the barriers. A “Knock-out” double-barrier option is profitable when the price of the underlying asset remains between the two barriers
Incorrect
The double barrier option is an exotic option with two barriers that bound the price fluctuation of the underlying asset. A “Knock-in” double-barrier option is profitable when the price of the underlying asset reaches either one of the barriers. A “Knock-out” double-barrier option is profitable when the price of the underlying asset remains between the two barriers
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Question 30 of 30
30. Question
Which of the following is an accurate description of what a Forex Dealer Member (FDM) do?
Correct
A Retail Foreign Exchange Dealer and/or a Futures Commission Merchant that conducts a significant amount of on-exchange business and acts as a retail forex counterparty is a Forex Dealer Member (FDM) of NFA.
Incorrect
A Retail Foreign Exchange Dealer and/or a Futures Commission Merchant that conducts a significant amount of on-exchange business and acts as a retail forex counterparty is a Forex Dealer Member (FDM) of NFA.