Which of the following is the payoff from an average strike put option?
A. The excess of the strike price over the average stock price, if positive
B. The excess of the final stock price over the average stock price, if positive
C. The excess of the average stock price over the strike price, if positive
D. The excess of the average stock price over the final stock price, if positive
What is the number of different option series used in creating a butterfly spread?
A. 1
B. 2
C. 3
D. 4
The most recent settlement bond futures price is 103.5. Which of the following four
bonds is cheapest to deliver?
A. Quoted bond price = 110; conversion factor = 1.0400.
B. Quoted bond price = 160; conversion factor = 1.5200.
C. Quoted bond price = 131; conversion factor = 1.2500.
D. Quoted bond price = 143; conversion factor = 1.3500.
A floating lookback call option pays off which of the following
A. The amount by which the final stock price exceeds the minimum stock price
B. The amount by which the maximum stock price exceeds the final stock price
C. The amount by which the strike price exceeds the minimum stock price
D. The amount by which the maximum stock price exceeds the strike price
Gamma tends to be high for which of the following
A. At-the money options
B. Out-of-the money options
C. In-the-money options
D. Options with a long time to maturity
Which of the following is true when delta, but not gamma, is used in calculating VaR
for option positions?
A. VaR for a long call is too low and VaR for a long put is too low
B. VaR for a long call is too low and VaR for a long put is too high
C. VaR for a long call is too high and VaR for a long put is too low
D. VaR for a long call is too high and VaR for a long put is too high
Which of the following is true for the party paying fixed in a newly negotiated interest
rate swap when the yield curve is upward sloping?
A. The early forward contracts underlying the swap have a positive value and the later
ones have a negative value
B. The early forward contracts underlying the swap have a negative value and the later
ones have a positive value
C. The swap is designed so that all forward contracts have zero value
D. Sometimes A is true and sometimes B is true
A stock price is $100. Volatility is estimated to be 20% per year. What is an estimate of
the standard deviation of the change in the stock price in one week?
A. $0.38
B. $2.77
C. $3.02
D. $0.76
Which of the following is NOT a letter in the Greek alphabet?
A. delta
B. rho
C. vega
D. gamma
The conversion factor for a bond is approximately
A. The price it would have if all cash flows were discounted at 6% per annum
B. The price it would have if it paid coupons at 6% per annum
C. The price it would have if all cash flows were discounted at 8% per annum
D. The price it would have if it paid coupons at 8% per annum
A short forward contract on an asset plus a long position in a European call option on
the asset with a strike price equal to the forward price is equivalent to
A. A short position in a call option
B. A short position in a put option
C. A long position in a put option
D. None of the above
A variable x starts at zero and follows the generalized Wiener process
dx = a dt + b dz
where time is measured in years. During the first two years a=3 and =4. During the
following three years a=6 and =3. What the standard deviation of the value of the
variable at the end of 5 years
A. 6.2
B. 6.7
C. 7.2
D. 7.7
Which of the following is true
A. The Gaussian copula model assumes that the defaults of different companies are
independent.
B. The Gaussian copula model assumes that defaults, conditional on the value of a
factor , are independent.
C. The Gaussian copula model assumes that the number of defaults is normally
distributed.
D. None of the above.
If the volatility implied from an at-the-money put currency option were used to price
other put options on the currency, which of the following would be true?
A. Out-of-the money and in-the-money prices would be too high
B. Out-of-the money and in-the-money prices would be too low
C. Out-of-the-money option prices would be too high and in-the-money option prices
would be too low
D. Out-of-the-money option prices would be too low and in-the-money option prices
would be too high
Which of the following is true?
A. The quadratic model approximates daily changes using delta and gamma
B. The quadratic model approximates daily changes using delta, but not gamma
C. The quadratic model approximates daily changes using gamma, but not delta
D. None of the above