CME-1 Financial Instruments

Question 1

What is 'sukuk' and how does it differ from a conventional bond?

Accepted Answer

Sukuk represents ownership in an underlying asset or project and pays returns from asset performance, while bonds are interest-bearing debt

Answer

Sukuk are Shariah-compliant securities representing proportional ownership in tangible assets or projects, generating returns from asset use or profit, not interest (riba).

Question 2

What is the most common structure used for corporate sukuk in Saudi Arabia?

Accepted Answer

Ijara Sukuk (lease-based)

Answer

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).

Question 3

What is an 'Exchange Traded Fund' (ETF) listed on the Saudi Exchange?

Accepted Answer

An open-ended fund whose units trade on the exchange like shares, tracking an index or basket of assets

Answer

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.

Question 4

What is a 'derivative instrument' in the context of Saudi capital markets?

Accepted Answer

A financial contract whose value is derived from an underlying asset such as a stock, index, or commodity

Answer

Derivatives are financial contracts — such as futures, options, or swaps — whose value depends on the performance of an underlying asset, index, or rate.

Question 5

What does a 'call option' give the holder the right to do?

Accepted Answer

Buy the underlying asset at the strike price before or at expiry

Answer

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.

CME-1 Practice Test

CME-1 Practice Test

CME-1 Financial Instruments