CMSA (DERIVATIVE FUNDAMENTALS) EXAM QUESTIONS
AND GUARANTEED CORRECT ANSWERS LATEST UPDATE
2024/2025
Define Derivative Market
A market developed over time to transfer risk from one part to another
Define a Long Position
The position that benefits when the underlying increases in value
Define Short position
The position that benefits when the underlying decreases in value
What are the two uses for derivatives?
1. Hedging - Protecting a financial position from loss
2. Speculating - Trying to make guesses about the direction of the underlying asset's value to make a
profit
What are the four derivative categories
1. Forwards
2. Futures
3. Swaps
4. Options
, What are the components of a forward contract
1. Underlying Asset
2. Delivery Date
3. Specified Price
4. Quantity
5. Type of Delivery
Define Futures Contract
A futures contract is similar to a forwards contract. It is an agreement t exchange an underlying asset for
a pre-specified price at a specified date in the future
What makes a futures contract different from a forward contract?
1. Futures are standardized forwards are not
2. Futures are traded on exchanges forwards are traded on OTC
3. Futures require margin and can be margin called
4. Futures are settled daily
What are the 7 components to a Futures Contract?
1. Underlying asset
2. Delivery date
3. Specified price
4. Contract size
5. Type of delivery
6. Tick size - Minimum increments the price will move
7. Initial margin & maintenance margin
AND GUARANTEED CORRECT ANSWERS LATEST UPDATE
2024/2025
Define Derivative Market
A market developed over time to transfer risk from one part to another
Define a Long Position
The position that benefits when the underlying increases in value
Define Short position
The position that benefits when the underlying decreases in value
What are the two uses for derivatives?
1. Hedging - Protecting a financial position from loss
2. Speculating - Trying to make guesses about the direction of the underlying asset's value to make a
profit
What are the four derivative categories
1. Forwards
2. Futures
3. Swaps
4. Options
, What are the components of a forward contract
1. Underlying Asset
2. Delivery Date
3. Specified Price
4. Quantity
5. Type of Delivery
Define Futures Contract
A futures contract is similar to a forwards contract. It is an agreement t exchange an underlying asset for
a pre-specified price at a specified date in the future
What makes a futures contract different from a forward contract?
1. Futures are standardized forwards are not
2. Futures are traded on exchanges forwards are traded on OTC
3. Futures require margin and can be margin called
4. Futures are settled daily
What are the 7 components to a Futures Contract?
1. Underlying asset
2. Delivery date
3. Specified price
4. Contract size
5. Type of delivery
6. Tick size - Minimum increments the price will move
7. Initial margin & maintenance margin
