TEST BANK
Introduction to Derivatives and Risk Management
Don M. Chance
10th Edition
PR
O
FD
O
C
,Table of Contents
Part I: Overview of Derivatives and Risk Management
1. Introduction to Derivatives
2. The Derivative Markets
3. The Role of Derivatives in Risk Management
Part II: Futures and Forwards
4. Introduction to Futures and Forwards
5. Hedging with Futures
6. Determination of Forward and Futures Prices
7. Interest Rate Futures
8. Currency and Stock Index Futures
Part III: Options
9. Introduction to Options
10. Option Valuation: Basic Principles
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11. Option Valuation: The Binomial Model
12. Option Valuation: The Black-Scholes Model
13. Option Strategies
14. Hedging with Options
Part IV: Swaps and Other Derivatives
O
15. Swaps
16. Interest Rate Derivatives
17. Currency and Equity Swaps
18. Exotic Options and Other Derivative Products
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Part V: Risk Management Applications
19. Measuring and Managing Risk
20. Value at Risk (VaR) and Other Risk Metrics
21. Credit Derivatives and Credit Risk
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22. Enterprise Risk Management
Part VI: Regulation, Ethics, and the Financial Crisis
23. Derivatives Regulation and Accounting
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24. Derivatives, Ethics, and the Financial Crisis
Appendices
A. Mathematical Review for Derivatives
B. Statistical Concepts for Risk Management
C. Option Pricing Tables
,All Answers Provided at the End Part of this Document
CHAPTER 1: INTRODUCTION
MULTIPLE CHOICE TEST QUESTIONS
1. The market value of the derivatives contracts worldwide totals
a. less than a trillion dollars
b. in the hundreds of trillion dollars
c. over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
e. none of the above
2. Cash markets are also known as
a. speculative markets
b. spot markets
c. derivative markets
d. dollar markets
e. none of the above
PR
3. A call option gives the holder
a. the right to buy something
b. the right to sell something
c. the obligation to buy something
d. the obligation to sell something
e. none of the above
O
4. Which of the following instruments are contracts but are not securities
a. stocks
b. options
FD
c. swaps
d. a and b
e. b and c
5. The positive relationship between risk and return is called
a. expected return
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b. market efficiency
c. the law of one price
d. arbitrage
e. none of the above
C
6. A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
7. Which of the following are advantages of derivatives?
a. lower transaction costs than securities and commodities
b. reveal information about expected prices and volatility
c. help control risk
, d. make spot prices stay closer to their true values
PR
O
FD
O
C
Introduction to Derivatives and Risk Management
Don M. Chance
10th Edition
PR
O
FD
O
C
,Table of Contents
Part I: Overview of Derivatives and Risk Management
1. Introduction to Derivatives
2. The Derivative Markets
3. The Role of Derivatives in Risk Management
Part II: Futures and Forwards
4. Introduction to Futures and Forwards
5. Hedging with Futures
6. Determination of Forward and Futures Prices
7. Interest Rate Futures
8. Currency and Stock Index Futures
Part III: Options
9. Introduction to Options
10. Option Valuation: Basic Principles
PR
11. Option Valuation: The Binomial Model
12. Option Valuation: The Black-Scholes Model
13. Option Strategies
14. Hedging with Options
Part IV: Swaps and Other Derivatives
O
15. Swaps
16. Interest Rate Derivatives
17. Currency and Equity Swaps
18. Exotic Options and Other Derivative Products
FD
Part V: Risk Management Applications
19. Measuring and Managing Risk
20. Value at Risk (VaR) and Other Risk Metrics
21. Credit Derivatives and Credit Risk
O
22. Enterprise Risk Management
Part VI: Regulation, Ethics, and the Financial Crisis
23. Derivatives Regulation and Accounting
C
24. Derivatives, Ethics, and the Financial Crisis
Appendices
A. Mathematical Review for Derivatives
B. Statistical Concepts for Risk Management
C. Option Pricing Tables
,All Answers Provided at the End Part of this Document
CHAPTER 1: INTRODUCTION
MULTIPLE CHOICE TEST QUESTIONS
1. The market value of the derivatives contracts worldwide totals
a. less than a trillion dollars
b. in the hundreds of trillion dollars
c. over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
e. none of the above
2. Cash markets are also known as
a. speculative markets
b. spot markets
c. derivative markets
d. dollar markets
e. none of the above
PR
3. A call option gives the holder
a. the right to buy something
b. the right to sell something
c. the obligation to buy something
d. the obligation to sell something
e. none of the above
O
4. Which of the following instruments are contracts but are not securities
a. stocks
b. options
FD
c. swaps
d. a and b
e. b and c
5. The positive relationship between risk and return is called
a. expected return
O
b. market efficiency
c. the law of one price
d. arbitrage
e. none of the above
C
6. A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
7. Which of the following are advantages of derivatives?
a. lower transaction costs than securities and commodities
b. reveal information about expected prices and volatility
c. help control risk
, d. make spot prices stay closer to their true values
PR
O
FD
O
C
