Options, Futures, and Derivatives Flashcards
7 cards from real CPFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Options, Futures, and Derivatives flashcards as text
Theta in option pricing primarily represents:
Answer: Time decay of the option
Theta measures the rate of decline in option value due to the passage of time.
A company expecting to receive euros in 90 days can hedge currency risk by:
Answer: Selling euro futures
Selling euro futures locks in a sale price for euros to be received later.
The intrinsic value of an in-the-money call option equals:
Answer: Underlying price minus strike
An in-the-money call's intrinsic value is the underlying price minus the strike price.
A protective put strategy involves:
Answer: Owning stock and buying a put
A protective put combines a long stock position with a long put to limit downside.
Which derivative obligates both parties to transact, rather than granting a right?
Answer: Forward contract
A forward contract obligates both parties to buy and sell at the agreed price.
Credit default swaps (CDS) are primarily used to:
Answer: Transfer credit risk of a reference entity
A CDS transfers the credit risk of a borrower defaulting to the protection seller.
The minimum amount that must be maintained in a futures margin account is the:
Answer: Maintenance margin
Maintenance margin is the floor below which a margin call is triggered.