What is a derivative security? A financial security whose payoff is linked to another prior issued security A security that represents ownership in a corporation A type of insurance policy A bond issued by a government

A financial security whose payoff is linked to another prior issued security

What does a derivative security involve? An agreement between two parties to exchange a standard quantity of an asset or cash flow at a predetermined price and at a specified date in the future A government-issued bond A loan agreement between a bank and a borrower The purchase of a physical asset

An agreement between two parties to exchange a standard quantity of an asset or cash flow at a predetermined price and at a specified date in the future

How does the value of a derivative security change? Its value changes as the value of the security to be exchanged changes It remains constant regardless of market conditions It is determined by the issuing government It is fixed at the time of issuance

Its value changes as the value of the security to be exchanged changes

What is a key function of derivative securities? Offers a fixed interest payment Provides direct ownership in a company Acts as a savings account Involves the buying and selling, or transference, of risk

Involves the buying and selling, or transference, of risk

What is a consideration when trading derivative securities? It requires a government license It is only available to institutional investors It must be traded on a physical exchange Trading it should not adversely affect the economic system

Trading it should not adversely affect the economic system

What is a derivative security agreement? A government bond issuance A contract to buy a house A loan agreement with a bank An agreement between two parties to exchange a standard quantity of an asset at a predetermined price at a specified date in the future

An agreement between two parties to exchange a standard quantity of an asset at a predetermined price at a specified date in the future

What are derivative securities markets? Markets for trading physical commodities Real estate markets Stock exchanges for public companies The markets in which derivative securities trade, newest of the financial security markets

The markets in which derivative securities trade, newest of the financial security markets

What is a spot contract? A government bond issuance An agreement between a buyer and a seller at time 0, when the seller of the asset agrees to deliver it immediately and the buyer agrees to pay for that asset A loan agreement with a bank A future agreement to exchange assets

An agreement between a buyer and a seller at time 0, when the seller of the asset agrees to deliver it immediately and the buyer agrees to pay for that asset

What is a forward contract? A government bond issuance A loan agreement with a bank An agreement between a buyer and a seller at time 0 to exchange a nonstandardized asset for cash at some future date A spot contract for immediate delivery

An agreement between a buyer and a seller at time 0 to exchange a nonstandardized asset for cash at some future date

Understanding Derivative Securities and Financial Instruments in Global Markets

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Finance - Personal Finance

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Cards in this deck(100)

What is a derivative security?

What does a derivative security involve?

How does the value of a derivative security change?

What is a key function of derivative securities?

What is a consideration when trading derivative securities?

Who credited the derivative securities markets with helping the banking system?

What is a derivative security agreement?

What are derivative securities markets?

What is a spot contract?

What is a forward contract?

What is a future contract?

Why do spot transactions occur?

What is a forward contract?

What are credit derivatives used for?

What is a future contract?

Who are floor brokers?

Who are professional traders?

Who are position traders?

Who are day traders?

Who are scalpers?

What is a long position in futures trading?

What is a short position in futures trading?

What is the role of a clearinghouse in futures trading?

What is a trading pit?

What is an open-outcry auction?

What is the credit derivative market known for?

What is a credit forward?

What does open interest refer to in futures trading?

What is the initial margin in futures trading?

What is the maintenance margin in futures trading?

What is a leverage investment in futures trading?

What is a spot contract?

What is a forward contract?

What is a futures contract?

What does 'marked to market' mean in futures trading?

What is an option in financial markets?

What is a call option?

What is a premium in options trading?

What is a put option?

What is an American option?

What is a European option?

What is the Black-Scholes pricing model used for?

What is a stock index option?

Why might options on future contracts be more attractive to investors?

What are credit options used for?

What is a credit spread call option?

What is a digital default option?

What does the Securities and Exchange Commission (SEC) regulate?

What is the role of the Commodities Futures Trading Commission (CFTC)?

What are swaps in financial markets?

What are swaptions?

What is the foreign exchange market?

What is a foreign exchange rate?

What is foreign exchange risk?

What is currency depreciation?

What is currency appreciation?

What is dollarization?

What are spot foreign exchange transactions?

What are forward foreign exchange transactions?

Which countries are included in the Eurozone?

What are the currencies of the BIMP-EAGA countries?

What is the primary function of stock markets?

What is a stock market?

What is common stock?

What is preferred stock?

What is the seniority of preferred stock?

What is nonparticipating preferred stock?

What is cumulative preferred stock?

What are primary stock markets?

What are secondary stock markets?

What does life insurance provide?

What does casualty insurance cover?

What is an insurance contract?

What is the principle of pooling of risk in insurance?

What is a premium in insurance?

Who undertakes the risk in an insurance contract?

Who is the assured in an insurance contract?

What is the instrument in which the contract of insurance is generally embodied called?

What is adverse selection in insurance?

What is moral hazard in life insurance?

What type of insurance problem occurs when doctors and patients agree to take extra laboratory tests which may not be necessary and payment is charged to insurance companies?

What type of insurance problem occurs when a person with chronic health problems applies for an insurance policy?

All of the following are the basic lines of Life Insurance EXCEPT:

What is a pure life insurance with no investment element called?

What type of policy combines a pure insurance and savings element and guarantees a payout to the beneficiary before reaching retirement age?

What is credit life insurance?

What does HMO stand for in health insurance?

Loans made by an insurance company to its policyholder using their policies as collateral are considered as what of the insurance company?

Reserves based on actuarial assumptions regarding an insurer's expected liability or commitment are considered as what of the insurance company?

What is an insurance guarantee fund?

What was the currency of Belgium before the Euro?

What was Austria's currency before the Euro?

What was Finland's currency before the Euro?

What was France's currency before the Euro?

What was Germany's currency before the Euro?

What was Greece's currency before the Euro?

What was Ireland's currency before the Euro?

What was Italy's currency before the Euro?

What was Luxembourg's currency before the Euro?

What was the Netherlands' currency before the Euro?

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Understanding Derivative Securities and Financial Instruments in Global Markets

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