You are an issuer of a straight bond and you want to change your exposure from a fixed rate to a floating rate because you expect a fall in interest rates. What would you do?
A. Buy an IRS
B. Sell an IRS
C. Buy a FRA
D. Do nothing because the bond coupon is already a fixed rate
How could you close out a futures contract?
A. reverse and cash trade
B. cash and carry
C. reverse cash and carry
D. offset
In hedging, caps are
A. frequently purchased by issuers of floating rate debt
B. frequently sold by issuers of floating rate debt
C. frequently sold by issuers having an FX risk
D. frequently purchased by issuers having an FX risk
Which of these statements is correct?
A. The strike price of a Bermudan option is an average.
B. A Bermudan option can be exercised only on a few specific dates prior to expiration.
C. A Bermudan option can be exercised at any time before its maturity date.
D. A Bermudan option can be exercised only at maturity.
The writer of an options contract:
A. bears a risk limited to the premium paid
B. bears a substantial risk
C. bears a risk limited to the premium received
D. bears no risk
Settlement prices on futures contracts are
A. official prices calculated by the exchange at the close of trading for the purpose of making margin calculations
B. official prices calculated by a panel of central banks
C. official prices calculated by the central bank where the stock exchange is located
D. never used
What is the "spread" in an interest rate swap (IRS)?
A. the interest rate differential between the fixed and floating leg of the swap
B. the brokerage fee for an interest rate swap transaction
C. the payment made when a swap is terminated
D. the difference between the swap rate and the benchmark government yield
What deals are usually associated with a collar?
A. A purchase of a cap and a sale of a cap at higher reference rate
B. A purchase of a floor and a sale of a cap or vice versa
C. A purchase of a cap and a purchase of a floor
D. A purchase of a step-up cap and a sale of a step-down floor
The payments due on a FRA are settled:
A. on the trade date
B. on the maturity date of the FRA
C. daily in accruals
D. on the start date of the FRA
A European-style option is:
A. an option traded in EUR
B. an option which can be exercised at any time between the purchase and expiration date
C. an option with premium payable only on its expiry date
D. an option which can be exercised only at maturity
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