Financial Instruments Flashcards
6 cards from real CME-1 practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Instruments flashcards as text
What is 'sukuk' and how does it differ from a conventional bond?
Answer: Sukuk represents ownership in an underlying asset or project and pays returns from asset performance, while bonds are interest-bearing debt
Sukuk are Shariah-compliant securities representing proportional ownership in tangible assets or projects, generating returns from asset use or profit, not interest (riba).
What is the most common structure used for corporate sukuk in Saudi Arabia?
Answer: Ijara Sukuk (lease-based)
Ijara (lease-based) sukuk is the most widely used structure in Saudi Arabia, where sukuk holders own assets leased to an obligor who pays periodic rental (equivalent to coupon).
What is an 'Exchange Traded Fund' (ETF) listed on the Saudi Exchange?
Answer: An open-ended fund whose units trade on the exchange like shares, tracking an index or basket of assets
ETFs are open-ended investment funds listed on the Saudi Exchange that track an index or asset basket, offering intraday tradability and typically lower fees than active funds.
What is a 'derivative instrument' in the context of Saudi capital markets?
Answer: A financial contract whose value is derived from an underlying asset such as a stock, index, or commodity
Derivatives are financial contracts — such as futures, options, or swaps — whose value depends on the performance of an underlying asset, index, or rate.
What does a 'call option' give the holder the right to do?
Answer: Buy the underlying asset at the strike price before or at expiry
A call option grants the holder the right (not obligation) to buy the underlying asset at the specified strike price on or before the expiration date.
What is the relationship between bond prices and interest rates?
Answer: They move inversely: when interest rates rise, bond prices fall, and vice versa
Bond prices and interest rates have an inverse relationship: when market rates rise, existing bond prices fall because their fixed coupons are less attractive relative to new bonds.
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