1. An increase in basis will ______ a long hedge and ______ a short hedge.

a.hurt / benefit

b.hurt / hurt

c.benefit / hurt

d.benefit / benefit

2. A trader who has a _______ position in crude futures believes the price of crude will ________

in the future.

a.short / increase

b.long / increase

c.long / stay the same

d.none of the above

3. A trader is long 10 gasoline futures contracts that expire in April. To close his position

before the delivery date the trader must.

a.buy 10 May gasoline futures contracts.

b.buy 10 April gasoline futures contracts.

c.sell 10 April gasoline futures contracts.

d.sell 10 May gasoline futures contracts.

4. The risk caused due to increased funding costs is called __________ risk.

5. What are the different types of basis risks? Explain them?

6. A positive basis indicates that the futures price is higher than the expected

future spot price.a.True b.False

7.What is Arbitrage?

8.What factors determine the presence of Storage arbs? Explain about open and close arbs?

9. There exists a strong positive correlation between the spot and futures prices.a.Trueb.False

10. Describe Long and Short Hedges?

11.Which of the following explain the functionality of set and put option?

a.A put option sets the ceiling price for the commodity. A call option sets the floor price for the commodity.

b.A put option sets the floor price for the commodity. A call option sets the ceiling price for the commodity.

c.Both put and call option sets the floor price for the commodity.

d.Both put and call option sets the ceiling price for the commodity.