TEST BANK
CAPITAL MARKETS: INSTITUTIONS AND INSTRUMENTS
FABOZZI/MODIGLIANI
Chapter 16
THE MARKET FOR STOCK INDEX PRODUCTS
AND OTHER EQUITY DERIVATIVES
MULTIPLE CHOICE
1. Options written on a stock index include:
[E]
2. Stock index options are regulated by:
[M]
3. A contract’s open interest is used to measure:
[M]
4. To settle a stock index option, the exchange-assigned option writer:
5. The value of a stock index option is equal to:
[M]
6. The exercise provision of the S&P 100 index option is that:
[M]
7. A FLEX option is a contract whereby the terms of the contract can be customized with
respect to:
[M]
8. Which of the following statements is most correct?
[M]
9. Options markets have developed in many countries, including:
10. Which of the following statements is false?
11. Stock index options can be used to:
[M]
12. Institutional investors employ index-related strategies in order to:
[M]
13. Which of the following statements is most correct?
[M]
14. With stock index options, the hedger:
[M]
15. Buying stock index futures, will:
98
16. An investment strategy that seeks to insure the value of a portfolio using a synthetic put
option strategy is called:
[M]
17. The decision on how to divide funds across the major asset classes is referred to as:
[M]
18. A strategy that seeks to enhance returns as a result of the mispricing of the futures
contract relative to the cash index is known as:
[M]
19. When counterparties agree to exchange the return on some stock index for an interest
rate, the arrangement is called:
[M]
20. Which of the following statements is false?
TRUE/FALSE
1. Stock index options are traded on the Chicago Board Options Exchange.
[E]
2. There are options on stock index futures.
[E]
[M]
4. A synthetic put option is created using stock index futures.
[M]
5. Equity swaps can be used to create an indexed portfolio to match some U.S. or non U.S.
stock index.
ESSAY QUESTIONS
1. Explain the investment features of stock index options and futures.
Key Issues:
2. What is the role of stock index options and futures in financial markets?
Key Issues:
3. Explain what an equity swap is and how it can be used.
Key Issues: