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1、Lecture 9 - Futures and Options on Foreign Exchange7-1 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a
2、 website, in whole or part.Lecture10(Chapter 07) Futures and Options on Foreign ExchangeTrue / False Questions1. A put option on $15,000 with a strike price of 10,000 is the same thing as a call option on 10,000 with a strike price of $15,000. True FalseMultiple Choice Questions2. A CME contract on
3、125,000 with September delivery A. is an example of a forward contract. B. is an example of a futures contract. C. is an example of a put option. D. is an example of a call option.3. Yesterday, you entered into a futures contract to buy 62,500 at $1.50 per . Suppose the futures price closes today at
4、 $1.46. How much have you made/lost? A. Depends on your margin balance. B. You have made $2,500.00. C. You have lost $2,500.00. D. You have neither made nor lost money, yet.4. In reference to the futures market, a “speculator“ A. attempts to profit from a change in the futures price B. wants to avoi
5、d price variation by locking in a purchase price of the underlying asset through a long position in the futures contract or a sales price through a short position in the futures contract C. stands ready to buy or sell contracts in unlimited quantity D. both b) and c)Lecture 9 - Futures and Options o
6、n Foreign Exchange7-2 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.5. Com
7、paring “forward“ and “futures“ exchange contracts, we can say that A. they are both “marked-to-market“ daily. B. their major difference is in the way the underlying asset is priced for future purchase or sale: futures settle daily and forwards settle at maturity. C. a futures contract is negotiated
8、by open outcry between floor brokers or traders and is traded on organized exchanges, while forward contract is tailor-made by an international bank for its clients and is traded OTC. D. both b) and c)6. Comparing “forward“ and “futures“ exchange contracts, we can say that A. delivery of the underly
9、ing asset is seldom made in futures contracts. B. delivery of the underlying asset is usually made in forward contracts. C. delivery of the underlying asset is seldom made in either contractthey are typically cash settled at maturity. D. both a) and b) E. both a) and c)7. In which market does a clea
10、ringhouse serve as a third party to all transactions? A. Futures B. Forwards C. Swaps D. None of the above8. In the event of a default on one side of a futures trade, A. the clearing member stands in for the defaulting party. B. the clearing member will seek restitution for the defaulting party. C.
11、if the default is on the short side, a randomly selected long contract will not get paid. That party will then have standing to initiate a civil suit against the defaulting short. D. both a) and b)Lecture 9 - Futures and Options on Foreign Exchange7-3 2012 by McGraw-Hill Education. This is proprieta
12、ry material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.9. Yesterday, you entered into a futures contract to buy 62,500 at $1.50 per
13、 . Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted? A. $1.5160 per . B. $1.208 per . C. $1.1920 per . D. $1.4840 per .10. Yesterday, you entered into a futures contract to sell 62,500 at $1.50 pe
14、r . Your initial performance bond is $1,500 and your maintenance level is $500. At what settle price will you get a demand for additional funds to be posted? A. $1.5160 per . B. $1.208 per . C. $1.1920 per . D. $1.1840 per .11. Yesterday, you entered into a futures contract to buy 62,500 at $1.50/.
15、Your initial margin was $3,750 (= 0.04 62,500 $1.50/ = 4 percent of the contract value in dollars). Your maintenance margin is $2,000 (meaning that your broker leaves you alone until your account balance falls to $2,000). At what settle price (use 4 decimal places) do you get a margin call? A. $1.47
16、20/ B. $1.5280/ C. $1.500/ D. None of the above12. Three days ago, you entered into a futures contract to sell 62,500 at $1.50 per . Over the past three days the contract has settled at $1.50, $1.52, and $1.54. How much have you made or lost? A. Lost $0.04 per or $2,500 B. Made $0.04 per or $2,500 C
17、. Lost $0.06 per or $3,750 D. None of the aboveLecture 9 - Futures and Options on Foreign Exchange7-4 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, dup
18、licated, forwarded, distributed, or posted on a website, in whole or part.13. Todays settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/100. Your margin account currently has a balance of $2,000. The next three days settlement prices are $0.8057/100, $0.7996/100,
19、 and $0.7985/100. (The contractual size of one CME Yen contract is 12,500,000). If you have a short position in one futures contract, the changes in the margin account from daily marking-to-market will result in the balance of the margin account after the third day to be A. $1,425. B. $2,000. C. $2,
20、325. D. $3,425.14. Todays settlement price on a Chicago Mercantile Exchange (CME) Yen futures contract is $0.8011/100. Your margin account currently has a balance of $2,000. The next three days settlement prices are $0.8057/100, $0.7996/100, and $0.7985/100. (The contractual size of one CME Yen cont
21、ract is 12,500,000). If you have a long position in one futures contract, the changes in the margin account from daily marking-to-market, will result in the balance of the margin account after the third day to be A. $1,425. B. $1,675. C. $2,000. D. $3,425.15. Suppose the futures price is below the p
22、rice predicted by IRP. What steps would assure an arbitrage profit? A. Go short in the spot market, go long in the futures contract. B. Go long in the spot market, go short in the futures contract. C. Go short in the spot market, go short in the futures contract. D. Go long in the spot market, go lo
23、ng in the futures contract.16. What paradigm is used to define the futures price? A. IRP B. Hedge Ratio C. Black Scholes D. Risk Neutral ValuationLecture 9 - Futures and Options on Foreign Exchange7-5 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. N
24、ot authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.17. Suppose you observe the following 1-year interest rates, spot exchange rates and futures prices. Futures contracts are avai
25、lable on 10,000. How much risk-free arbitrage profit could you make on 1 contract at maturity from this mispricing?A. $159.22 B. $153.10 C. $439.42 D. None of the aboveThe futures price of $1.48/ is above the IRP futures price of $1.4641/, so we want to sell (i.e. take a short position in 1 futures
26、contract on 10,000, agreeing to sell 10,000 in 1 year for $14,800).Profit = To hedge, we borrow $14,077.67 today at 4%, convert to euro at the spot rate of $1.45/, invest at 3%. At maturity, our investment matures and pays 10,000, which we sell for $14,800, and then we repay our dollar borrowing wit
27、h $14,640.78. Our risk-free profit = $159.22 = $14,800 - $14,640.78Lecture 9 - Futures and Options on Foreign Exchange7-6 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be
28、copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.18. Which equation is used to define the futures price? A. B. C. D. 19. Which equation is used to define the futures price? A. B. C. D. E. Lecture 9 - Futures and Options on Foreign Exchange7-7 2012 by McGr
29、aw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.20. If a currency futures contract (dire
30、ct quote) is priced below the price implied by Interest Rate Parity (IRP), arbitrageurs could take advantage of the mispricing by simultaneously A. going short in the futures contract, borrowing in the domestic currency, and going long in the foreign currency in the spot market. B. going short in th
31、e futures contract, lending in the domestic currency, and going long in the foreign currency in the spot market. C. going long in the futures contract, borrowing in the domestic currency, and going short in the foreign currency in the spot market. D. going long in the futures contract, borrowing in
32、the foreign currency, and going long in the domestic currency, investing the proceeds at the local rate of interest.21. Open interest in currency futures contracts A. tends to be greatest for the near-term contracts. B. tends to be greatest for the longer-term contracts. C. typically decreases with
33、the term to maturity of most futures contracts. D. both a) and c)22. The “open interest“ shown in currency futures quotations is A. the total number of people indicating interest in buying the contracts in the near future. B. the total number of people indicating interest in selling the contracts in
34、 the near future. C. the total number of people indicating interest in buying or selling the contracts in the near future. D. the total number of long or short contracts outstanding for the particular delivery month.23. If you think that the dollar is going to appreciate against the euro, you should
35、 A. buy put options on the euro. B. sell call options on the euro. C. buy call options on the euro. D. none of the aboveLecture 9 - Futures and Options on Foreign Exchange7-8 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
36、distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.24. From the perspective of the writer of a put option written on 62,500. If the strike price is $1.55/, and the option premium is $1,875, at what exchan
37、ge rate do you start to lose money? A. $1.52/ B. $1.55/ C. $1.58/ D. None of the above25. A European option is different from an American option in that A. one is traded in Europe and one in traded in the United States. B. European options can only be exercised at maturity; American options can be e
38、xercised prior to maturity. C. European options tend to be worth more than American options, ceteris paribus. D. American options have a fixed exercise price; European options exercise price is set at the average price of the underlying asset during the life of the option.26. An “option“ is A. a con
39、tract giving the seller (writer) of the option the right, but not the obligation, to buy (call) or sell (put) a given quantity of an asset at a specified price at some time in the future. B. a contract giving the owner (buyer) of the option the right, but not the obligation, to buy (call) or sell (p
40、ut) a given quantity of an asset at a specified price at some time in the future. C. a contract giving the owner (buyer) of the option the right, but not the obligation, to buy (put) or sell (call) a given quantity of an asset at a specified price at some time in the future. D. a contract giving the
41、 owner (buyer) of the option the right, but not the obligation, to buy (put) or sell (sell) a given quantity of an asset at a specified price at some time in the future.Lecture 9 - Futures and Options on Foreign Exchange7-9 2012 by McGraw-Hill Education. This is proprietary material solely for autho
42、rized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.27. An investor believes that the price of a stock, say IBMs shares, will increase in the next 60 days.
43、If the investor is correct, which combination of the following investment strategies will show a profit in all the choices?(i) - buy the stock and hold it for 60 days (ii) - buy a put option (iii) - sell (write) a call option (iv) - buy a call option (v) - sell (write) a put option A. (i), (ii), and
44、 (iii) B. (i), (ii), and (iv) C. (i), (iv), and (v) D. (ii) and (iii)28. Most exchange traded currency options A. mature every month, with daily resettlement. B. have original maturities of 1, 2, and 3 years. C. have original maturities of 3, 6, 9, and 12 months. D. mature every month, without daily
45、 resettlement.29. The volume of OTC currency options trading is A. much smaller than that of organized-exchange currency option trading. B. much larger than that of organized-exchange currency option trading. C. larger, because the exchanges are only repackaging OTC options for their customers. D. n
46、one of the aboveLecture 9 - Futures and Options on Foreign Exchange7-10 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distribute
47、d, or posted on a website, in whole or part.30. In the CURRENCY TRADING section of The Wall Street Journal, the following appeared under the heading OPTIONS:Which combination of the following statements are true?(i)- The time values of the 68 May and 69 May put options are respectively .30 cents and
48、 .50 cents. (ii)- The 68 May put option has a lower time value (price) than the 69 May put option. (iii)- If everything else is kept constant, the spot price and the put premium are inversely related. (iv)- The time values of the 68 May and 69 May put options are, respectively, 1.63 cents and 0.83 c
49、ents. (v)- If everything else is kept constant, the strike price and the put premium are inversely related. A. (i), (ii), and (iii) B. (ii), (iii), and (iv) C. (iii) and (iv) D. ( iv) and (v)31. With currency futures options the underlying asset is A. foreign currency. B. a call or put option written on foreign currency. C. a futures contract on the foreign currency. D. none of the above32. Exercise of a currenc