Free Sample Question
Novation

Novation of a derivative product means:

  1. Two clearing participants settle directly with each other
  2. The Clearing House guarantees contract settlement
  3. Credit risk is not a major concern
  4. Both counterparties are guaranteed to make a profit
A
I and IV only
B
II and III only
C
III and IV only
D
II, III and IV only
Futures Contract Specification

Which of the following features of a futures contract is defined in the standard specification set out by the futures exchange?

  1. Settlement method
  2. Quantity of underlying asset
  3. Contract month
  4. Market price
A
I, II and III only
B
II and III only
C
I, II and IV only
D
I and IV only
Derivative Warrants

What are derivative warrants?

A
Call or put options issued by the company, which will issue the underlying shares
B
Call options issued by the underlying company over existing shares
C
Same as exchange-traded options
D
Call or put options issued by a bank over existing shares
Futures Trade

William Wong bought 5 1-month HIBOR futures at 97.5 and sold 5 1-month HIBOR futures at 98.34.  How much profit or loss did William make on the trade?

A
A profit of HK$52,500
B
A loss of HK$52,500
C
A profit of HK$5,250,000
D
A loss of HK$5,250,000
Forward Exchange Rate

The current USD/HKD exchange rate is 7.652.  The 1-year Hong Kong interest rate is 1.22% and the US equivalent is 1.58%.  What is the 1-year forward exchange rate?

A
7.625
B
7.679
C
7.730
D
7.818
OTC Mandatory Reporting

Which of the following statements are CORRECT regarding the mandatory reporting of OTC derivative transactions?

  1. An institution with a reporting obligation must become a member of the Hong Kong Futures Clearing Corporation
  2. Mandatory reporting covers exchange-traded options
  3. Reporting should be to the Hong Kong Monetary Authority
  4. Reporting must be within two business days of trade execution
A
I and II only
B
I, II and III only
C
III and IV only
D
I, II, III and IV