Lesson 2: NISM 1

Derivative is a contract or a product whose value is derived from a variable known as underlying. True or False?

Near the end of 20^th century, financial derivatives accounted for nearly ________ of daily derivative transactions.

Securities Contracts (Regulation) Act, 1956 [SC(R)A] defines “derivative” to include‐ A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. True or False?

Section 45U(a) of RBI act defines derivatives as an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities. True or False?

Which of the following is included as Derivative under the Section 45U(a) of RBI act:

Which is not a derivative product?

Swaps is a type of derivative. True or False?

Increased fluctuations in underlying asset prices and integration of financial markets globally are some of the factors driving the growth of financial derivatives. True or False?

The “futures price” of a derivative is the:

___________ are also known as Over The Counter (OTC) contracts:

A___________ is an agreement made between two parties to exchange cash flows in the future according to a formula.

Interest rate Swap involves swapping only the interest related cash flows between the parties in different currency. True or False?

Currency Swap involves swapping both principal and interest between the parties, with swapping of opposite cash flows in two different currencies. True or False?

___________ use derivatives to offset price volatility risk in underlying market.

You are expecting USDINR to move up. You are ________ on USDINR.

You are not too sure of the price movement of Rupee vs Dollar. You wanted to purchase the share of an exporter company. All other things remaining same, you purchased the share of an exporter and sold shares of an importer company. You took a ________ position

Who helps in maintaining parity of currency pair prices in different markets (exchanges)?

_______________ brings in the much-needed liquidity in the financial markets?

________ want to give away the risk whereas ________ are willing to take risk.

Derivatives market helps in improving price discovery based on fair valuations and expectations. True or False?

Trading of derivatives is governed by the regulatory framework under the SC(R)A. True or False?

Which of the following is incorrect about derivatives?

In a ____________ trade, contracts are tailor made to fit in the specific requirements of dealing counter-parties.

_____________ contracts are standardized, traded on organized exchanges with prices determined by the interaction of buyers and sellers through anonymous auction platform.

OTC derivative market is less regulated market because these transactions occur in private among qualified counter-parties

Deepak, a currency trader is simultaneously trading in two geographically separated financial markets. He observes a difference in rate of EURUSD in Frankfurt and London. He buys 100 units EURUSD in Frankfurt and simultaneously sells 100 units in London. Deepak is a _________

A rise in temperature by 3 deg is likely to have an adverse effect on produce of corn. A farmer, who sells his produce in the domestic market, is expecting the temperature to rise by around 5 deg, which would reduce his produce. To protect himself against economic loss,  _________