Derivatives - Derivatives Section 1
- Option : B
- Explanation : During daily settlement losses and gains are collected and distributed to the respective parties.
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17. Which of the following statements about options is most accurate?
- Option : A
- Explanation : An option is strictly the right to buy (a call) or the right to sell (a put). It does not provide both choices. Similarly, the right to convert is an obligation, not a right.
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18. Which of the following is a characteristic of a put option on the stock?
- Option : B
- Explanation : A put option on a stock provides no guarantee of any change in the stock price. It has an expiration date, and it provides for a fixed price at which the holder can exercise the option, thereby selling the stock.
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- Option : A
- Explanation : A credit derivative is a class of derivative contracts between two parties, a credit protection buyer and a credit protection seller, in which the latter provides protection to the former against a specific credit loss.
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- Option : C
- Explanation : It is a swap because two parties agree to exchange cash flows in the future. Section
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