Ch.15: Introduction to Forwards and Futures

Which of the following correctly names the three types of arbitrage in the futures market?

Which of the following is an assumption underlying the Cost of Carry model of futures pricing?

What happens to the basis of a futures contract as it approaches maturity/expiry?

On a day when the spot price of Nifty is 24,894.25 and the futures price is 25,006.60, the basis for Nifty futures is:

Stocks or portfolios with a beta greater than 1 are called, and those with beta less than 1 are called:

A portfolio has four stocks with betas 0.5, 1.10, 1.30 and 0.90, weighted 35%, 15%, 20% and 30% respectively. The portfolio beta is closest to:

A calendar spread position is:

Index and stock futures contracts on the NSE typically follow which trading cycle?

For a Nifty futures contract with a contract multiplier (lot size) of 65 and a closing futures value of Rs. 24,894.25, the contract value works out to approximately:

Tick size in a futures contract refers to:

Per SEBI's contract-value review effective from November 2024, a new derivative contract must have a value of not less than what amount at introduction, with lot size fixed so the contract value on review stays within a defined band?

Convenience yield in futures pricing refers to:

For equity derivatives, the cost of carry is best described as:

A share is trading at Rs.100 in the cash market. To buy it, a person borrows at 6% p.a. and expects to earn Rs.2 in dividend over the year. His net cost of carry and break-even futures price are:

Under the expectations model of futures pricing, if the futures price of an asset is higher than its spot price, the market is said to be in:

Under SEBI's uniform-expiry-day framework for equity derivatives, which statement is correct?

Which of the following is an essential feature of a forward contract?

A forward contract is best described as:

In a forward deal, the party who agrees to buy the asset in the future is said to be:

Compared to forward contracts, futures contracts offer better price discovery mainly because:

Regarding counterparty risk, which statement correctly compares forwards and futures?

A futures contract can best be described as:

In a futures market, which term of the contract is decided by market forces rather than fixed by the exchange in advance?

If the futures price falls below the fair futures price (calculated via cost of carry), which arbitrage becomes profitable?

The Cost of Carry model of futures pricing is also known as the:

Gold spot price is Rs.62,130 per 10g and the 3-month cost of financing/storage/insurance is Rs.100 per 10g. If the 3-month futures is trading at Rs.62,280, which arbitrage is triggered, and what is the risk-free profit?

An index trades at 17,500 in the cash market. Cost of financing is 12% p.a. and expected dividend yield is 4% p.a., for a 90-day holding period. Using the non-continuous compounding formula, the fair futures price is closest to:

When a market participant expects to receive funds in future and wants to lock in current price levels before investing, they would use a:

When futures contracts on the exact underlying are not available, and a hedger instead uses futures on a closely related asset, this is called:

When hedging the systematic risk of a diversified portfolio using index futures, why is a 1:1 hedge ratio generally NOT appropriate (unlike single-stock futures hedging a single stock)?

Why are forward contracts described as illiquid?

The risk that a counterparty may fail to fulfil its contractual obligation under a forward contract is called:

The amount a market participant must deposit at the time of entering into a futures contract is called the:

An investor takes a long Nifty futures position at 22,250 with a lot size of 25. If the broker charges 10% of contract value as initial margin, the initial margin payable is:

Marking to Market (MTM) in the futures market refers to:

A trader goes long on Nifty futures at 22,250 (lot size 25). By end of day the contract closes at 22,308.70. The trader's MTM gain for the day is approximately:

Open Interest in the futures market refers to:

Which statement correctly distinguishes open interest from traded volume?

A person goes long in a futures contract at Rs.100. If the underlying settles at Rs.70 on expiry, his payoff is:

For futures contracts, the payoff for both long and short positions is described in the workbook as:

A person is short a futures contract at Rs.100. At expiry, the underlying settles at Rs.60. His payoff is:

A 'naked position' in the futures market means:

An outstanding/unsettled buy position in a futures contract is called a:

The price band of a futures contract is:

Why do futures and spot prices always converge exactly at the maturity of the futures contract?

You sold one XYZ stock futures contract at Rs.278 (lot size 1,200) and later bought it back at Rs.265. Your profit/loss is:

You are short one June XYZ futures contract (multiplier 50) at Rs.3,400 and close the position for a Rs.10,000 profit (ignore brokerage). Which closing action produced this profit?

The daily settlement price of a futures contract is calculated based on:

The final settlement price of a near-month futures contract, on its expiration day, is:

Which of the following correctly describes the three broad participant categories in the futures market?