1. What is the payoff of a European call option at expiration?
A) S - K
B) Max(S - K, 0)
C) K - S
D) Max(K - S, 0)
B) Max(S - K, 0) ✅
2. Which of the following factors increases the value of a call option?
A) Lower spot price
B) Higher volatility of the underlying asset
C) Lower risk-free interest rate
D) Shorter time to maturity
B) Higher volatility of the underlying asset ✅
3. What does the Black-Scholes model assume about price movements?
A) Stepwise deterministic price changes
B) Continuous, lognormally distributed price movements
C) Discrete, normally distributed price movements
D) Random walks without drift
B) Continuous, lognormally distributed price movements ✅
4. What is the purpose of delta hedging?
A) To neutralize the effect of small changes in the underlying asset’s price
B) To maximize the option’s theta
C) To speculate on volatility changes
D) To eliminate time value risk
A) To neutralize the effect of small changes in the underlying asset’s price ✅
5. What is the definition of Value at Risk (VaR)?
A) Maximum expected loss at a given confidence level over a specific time period
B) The average loss in the worst 5% of outcomes
C) The expected loss assuming default occurs
D) The probability of default times the exposure
A) Maximum expected loss at a given confidence level over a specific time period ✅
6. Which of the following best describes the put-call parity relationship?
A) C - P = K
B) C + S = P + K
C) C + PV(K) = P + S
D) C = P + PV(K) + S
C) C + PV(K) = P + S ✅
7. Which instrument gives the holder the right but not the obligation to buy an asset?
A) Call Option
B) Swap
C) Forward Contract
D) Put Option
A) Call Option ✅
8. Which type of risk arises from changes in exchange rates?
A) Interest rate risk
B) Credit risk
C) Currency risk
D) Operational risk
C) Currency risk ✅
9. Which risk measure is more sensitive to tail risks?
A) VaR
B) Standard Deviation
C) Beta
D) Expected Shortfall
D) Expected Shortfall ✅
10. What is an example of a natural hedge?
A) Entering into an interest rate swap
B) Buying a put option
C) Selling futures contracts
D) Offsetting foreign revenues with foreign expenses
D) Offsetting foreign revenues with foreign expenses ✅
11. Which of the following is NOT an assumption of the Black-Scholes model?
A) No transaction costs
B) Discrete trading opportunities
C) Constant volatility
D) Lognormal distribution of returns
B) Discrete trading opportunities ✅
12. Which of the following instruments carries counterparty risk?
A) Government Bonds
B) Futures
D) Exchange-traded Options
C) Forward Contract ✅
13. Which factor does NOT affect option value directly?
A) Time to maturity
B) Accounting policy
C) Volatility
D) Strike price
B) Accounting policy ✅
14. What type of option strategy involves buying a call and selling a call at a higher strike?
A) Covered call
B) Protective put
C) Bull spread
D) Straddle
C) Bull spread ✅
15. What is the purpose of a swap agreement?
A) Secure real estate
B) Avoid tax payments
C) Purchase equity shares
D) Exchange cash flows between parties
D) Exchange cash flows between parties ✅
16. Which of the following is NOT an assumption of the Black-Scholes model?
B) Lognormal distribution of returns
D) Discrete trading opportunities
D) Discrete trading opportunities ✅
17. Which of the following instruments carries counterparty risk?
B) Forward Contract
C) Exchange-traded Options
D) Futures
B) Forward Contract ✅
18. Which factor does NOT affect option value directly?
A) Accounting policy
B) Volatility
C) Time to maturity
A) Accounting policy ✅
19. What type of option strategy involves buying a call and selling a call at a higher strike?
A) Straddle
D) Covered call
20. What is the purpose of a swap agreement?
A) Exchange cash flows between parties
C) Secure real estate
D) Purchase equity shares
A) Exchange cash flows between parties ✅
21. Which of the following is NOT an assumption of the Black-Scholes model?
A) Discrete trading opportunities
B) No transaction costs
A) Discrete trading opportunities ✅
22. Which of the following instruments carries counterparty risk?
A) Exchange-traded Options
B) Government Bonds
23. Which factor does NOT affect option value directly?
B) Strike price
D) Time to maturity
24. What type of option strategy involves buying a call and selling a call at a higher strike?
B) Bull spread
C) Covered call
D) Protective put
B) Bull spread ✅
25. What is the purpose of a swap agreement?
B) Exchange cash flows between parties
C) Avoid tax payments
B) Exchange cash flows between parties ✅
26. Which of the following is NOT an assumption of the Black-Scholes model?
C) No transaction costs
D) Constant volatility
27. Which of the following instruments carries counterparty risk?
C) Government Bonds
28. Which factor does NOT affect option value directly?
A) Strike price
C) Accounting policy
C) Accounting policy ✅
29. What type of option strategy involves buying a call and selling a call at a higher strike?
A) Bull spread
B) Straddle
A) Bull spread ✅
30. What is the purpose of a swap agreement?
31. Which of the following is NOT an assumption of the Black-Scholes model?
A) Constant volatility
C) Lognormal distribution of returns
32. Which of the following instruments carries counterparty risk?
A) Futures
B) Exchange-traded Options
D) Government Bonds
33. Which factor does NOT affect option value directly?
D) Accounting policy
D) Accounting policy ✅
34. What type of option strategy involves buying a call and selling a call at a higher strike?
C) Protective put
35. What is the purpose of a swap agreement?
B) Purchase equity shares
36. Which of the following is NOT an assumption of the Black-Scholes model?
37. Which of the following instruments carries counterparty risk?
38. Which factor does NOT affect option value directly?
C) Strike price
39. What type of option strategy involves buying a call and selling a call at a higher strike?
B) Covered call
40. What is the purpose of a swap agreement?
A) Avoid tax payments
B) Secure real estate
41. Which of the following is NOT an assumption of the Black-Scholes model?
C) Discrete trading opportunities
D) No transaction costs
C) Discrete trading opportunities ✅
42. Which of the following instruments carries counterparty risk?
C) Futures
D) Forward Contract
D) Forward Contract ✅
43. Which factor does NOT affect option value directly?
D) Volatility
44. What type of option strategy involves buying a call and selling a call at a higher strike?
A) Protective put
D) Bull spread
D) Bull spread ✅
Which risk type is most directly addressed using interest rate swaps?
A) Liquidity risk
B) Interest rate risk
B
What does the Value at Risk (VaR) concept represent?
A) Average loss in worst-case scenarios
B) Maximum expected loss at a certain confidence level over a fixed time horizon
C) Total possible loss in case of default
D) Loss that occurs with 100% probability
Which of the following statements about Vega is correct?
A) It measures sensitivity to time decay
B) It measures the sensitivity of an option's price to changes in volatility
C) It measures the curvature of the price sensitivity
D) It measures interest rate sensitivity
What does a Delta of 0.8 for a call option indicate?
A) The option's price will increase by 0.80 if the underlying rises by 1
B) The probability of profit is 80%
C) The option is in the money
D) The strike price is above the market price
A
Which method assumes normally distributed returns in VaR calculation?
A) Historical Simulation
B) Monte Carlo Simulation
C) Variance-Covariance Method
D) Backtesting
C
What is the main assumption behind the Black-Scholes model?
A) Prices are constant over time
B) Returns follow a binomial process
C) No volatility in asset price
D) Asset returns follow a lognormal distribution
D
What is the purpose of a protective put?
A) To increase leverage
B) To generate income from selling options
C) To limit downside risk while keeping upside potential
D) To reduce volatility
What is the main difference between a forward and a future?
A) Forwards are marked-to-market daily
B) Futures are tailored to counterparties
C) Forwards have lower counterparty risk
D) Futures are standardized and traded on exchanges
Which of the following reduces a company’s market risk?
A) Entering into a commodity futures contract
B) Issuing equity
C) Increasing inventory turnover
D) Increasing debt financing
What does Theta represent in option pricing?
A) Volatility sensitivity
B) Time decay of the option value
C) Default probability
D) Price sensitivity to underlying
Which of the following Greeks is typically used for delta-hedging adjustments?
A) Theta
B) Vega
C) Rho
D) Gamma
Why might a company use a collar strategy?
A) To limit both potential losses and gains
B) To increase exposure to volatility
C) To offset fixed income risk
D) To speculate on large price swings
In a long straddle, when does the investor profit?
A) When interest rates rise
B) When there is a large price movement in either direction
C) When volatility decreases
D) When the price stays near the strike
Which of the following is not considered an operational risk?
A) Interest rate fluctuation
B) System failure
C) Employee fraud
D) Process error
What does a high Gamma indicate?
A) Volatility is very low
B) Option is deep in the money
C) Delta changes rapidly with the underlying asset
D) Theta is stable
What is the main risk mitigated by a currency swap?
B) Operational risk
C) Exchange rate risk
D) Interest rate risk
Which derivative gives the right but not the obligation to sell an asset?
A) Forward contract
B) Put option
C) Swap
D) Call option
Which component is not needed for Expected Loss calculation?
B) Probability of Default
C) Loss Given Default
D) Exposure at Default
Which risk metric accounts for the average of the worst losses beyond the VaR?
A) Expected Shortfall
B) Delta
C) Tracking Error
D) Beta
Which instrument carries daily mark-to-market risk?
A) Swap
B) Forward contract
C) Futures contract
D) Put option
What is an example of a natural hedge?
A) Buying a call option
B) Using a swap
C) Revenues and costs in the same foreign currency
D) Issuing fixed-rate debt
What does Rho measure in option pricing?
A) Sensitivity to volatility
B) Sensitivity to changes in interest rates
C) Sensitivity to time decay
D) Sensitivity to asset price
Which situation reflects a short call option risk?
A) Unlimited losses if the underlying price rises
B) Unlimited gain if the asset falls
C) Fixed loss if the price stays constant
D) Limited profit if the price drops
Why is Gamma important in hedging?
A) It stabilizes the option price
B) It relates to volatility
C) It measures time decay
D) It indicates how often a hedge needs rebalancing
Which of the following is best suited to hedge against falling equity prices?
A) Long put option
B) Currency forward
C) Interest rate swap
D) Short call option
Which risk is primarily measured using credit ratings and PD?
A) Market risk
B) Liquidity risk
C) Credit risk
In VaR calculation, what does the confidence level represent?
A) The expected loss
B) The average loss
C) The probability that the loss will not exceed VaR
D) The worst-case loss
Why might a firm prefer a futures contract over a forward?
A) Customized terms
B) More flexibility
C) Lower counterparty risk
D) No margin requirements
Which of the following reduces risk through diversification?
A) Uncorrelated asset returns
B) Short-selling
C) Leveraged positions
D) Perfectly correlated assets
What is the maximum loss for a protective put strategy?
A) Total investment
B) There is no loss
C) Strike price minus initial stock price plus premium
D) Stock price minus premium
What is the main purpose of a collar strategy in risk management?
A) To profit from interest rate changes
B) To protect downside while capping upside potential
C) To eliminate credit risk
D) To replicate a protective put at lower cost
What is typically the shape of a long straddle payoff diagram?
A) Flat with capped gains and losses
B) U-shaped with loss in the middle and gains on both sides
C) Inverted V-shape
D) Diagonal with constant slope
Which risk type is primarily addressed by a protective put?
A) Currency risk
C) Downside equity market risk
In a delta-neutral portfolio, what is the total delta exposure?
A) 0
B) 1
C) –1
D) Undefined
What does Gamma measure in the context of options?
A) Sensitivity of Vega to volatility
B) Sensitivity of Delta to changes in the underlying asset price
C) Sensitivity of Theta to time
D) Sensitivity of option price to interest rates
Which of the following would increase the value of a long call option?
A) Decrease in underlying price
B) Shorter time to maturity
C) Increase in implied volatility
D) Increase in strike price
Which measure captures expected losses beyond the VaR threshold?
A) Beta
B) Sharpe Ratio
C) Expected Shortfall
D) Modified Duration
What is the maximum loss for a long straddle strategy?
B) Cost of both options combined
C) Difference between call and put premiums
D) Unlimited
What is a key assumption of the variance-covariance method for VaR?
A) Fat-tailed return distributions
B) Linear returns and normally distributed asset returns
C) Perfect correlation between assets
D) Constant interest rates
What does Vega represent in option pricing?
A) Sensitivity to changes in the risk-free rate
B) Sensitivity to time decay
C) Sensitivity to volatility
D) Sensitivity to changes in dividend yield
Which risk does a company face when it cannot meet short-term obligations?
A) Operational risk
C) Market risk
D) Currency risk
How does a short call position react to rising asset prices?
A) Gains value
B) Remains unchanged
C) Becomes worthless
D) Loses value
Why is theta typically negative for long option positions?
A) Because of declining volatility
B) Because option value decreases over time
C) Due to increasing interest rates
D) Due to decreasing Delta
What is the primary function of a credit default swap (CDS)?
A) To hedge equity risk
B) To speculate on volatility
C) To transfer credit risk
D) To eliminate interest rate risk
Which of the following portfolios has the lowest VaR, all else equal?
A) Portfolio with uncorrelated assets
B) Portfolio with leveraged long positions
C) Portfolio with high covariance
D) Portfolio with only one asset
What is the risk if you cannot rebalance a delta hedge continuously?
A) Gamma risk
B) Currency mismatch
C) Volatility arbitrage
D) Diversification failure
A currency swap is most appropriate for hedging which type of risk?
A) Credit risk
C) Foreign exchange rate risk
D) Legal risk
What happens to the Black-Scholes call price when volatility increases?
A) It decreases
B) It remains constant
C) It increases
D) It becomes zero
What is the main disadvantage of historical simulation for VaR?
A) It assumes normality
B) It ignores actual historical data
C) It does not capture tail risks
D) It is backward-looking and non-parametric
Which strategy profits from low volatility and minimal price movement?
A) Long straddle
B) Long call
Zuletzt geändertvor 25 Tagen