SIBASHISH ACHARYA’s Post

www.sibashish.com WHO CAN ANSWER THIS MCQ?? Which of the following statements about derivative trading is NOT TRUE? A) Derivatives can be used to hedge against price fluctuations in the underlying asset. B) In a perfect market, the price of a derivative should always equal the current value of the underlying asset. C) The leverage provided by derivatives allows traders to control a larger position with a smaller amount of capital. D) Options trading strategies like straddles and strangles involve holding both call and put options to profit from volatility.

www.sibashish.com WHO CAN ANSWER THE FOLLOWING MCQ? Which of the following statements about derivative trading is NOT TRUE? A) The price of a futures contract converges to the spot price of the underlying asset as the contract approaches its expiration. B) Writing (selling) options exposes the seller to potentially unlimited risk, while the maximum profit is limited to the premium received. C) Delta-neutral strategies involve adjusting a portfolio to have a delta of zero, effectively making the portfolio immune to small price movements in the underlying asset. D) The payoff of a European option can be exercised at any time before its expiration date.

www.sibashish.com WHO CAN ANSWER THE FOLLOWING KILLER MCQ? Which of the following statements about exotic options and advanced derivatives is NOT TRUE? A) Barrier options are path-dependent options whose payoff depends on whether the underlying asset's price reaches a certain level during the option's life. B) A "quanto" option is a type of derivative where the underlying asset is denominated in one currency, but the payoff is converted to and paid in another currency, with exchange rate risk hedged. C) In a "lookback" option, the strike price is set retrospectively at the lowest or highest price of the underlying asset during the option's life, maximizing the holder's payoff. D) A "binary" or "digital" option pays a variable amount depending on the difference between the strike price and the underlying asset's final price at expiration.

www.sibashish.com Lets see who can answer 4/4. 1. Which of the following best describes a currency swap? a) A contract where two parties agree to exchange principal and interest payments in different currencies b) A contract where two parties agree to exchange currency at a future date at a pre-agreed rate c) A contract where one party has the right, but not the obligation, to exchange currency at a future date d) A contract that sets a fixed rate for exchanging currency over a series of future dates 2. In the context of currency futures, what does "basis risk" refer to? a) The risk of a change in the spread between the spot price and the futures price b) The risk of a change in interest rates affecting the value of a futures contract c) The risk of a currency moving in the opposite direction to the position held d) The risk of default by the counterparty in a futures contract 3. Which of the following is typically NOT a use of currency options? a) Hedging against adverse movements in exchange rates b) Speculating on future currency movements c) Locking in a guaranteed profit in foreign exchange transactions d) Arbitraging price differences between different markets Certainly! Here are five moderately difficult multiple-choice questions (MCQs) on currency derivatives: 1. Which of the following best describes a currency swap? a) A contract where two parties agree to exchange principal and interest payments in different currencies b) A contract where two parties agree to exchange currency at a future date at a pre-agreed rate c) A contract where one party has the right, but not the obligation, to exchange currency at a future date d) A contract that sets a fixed rate for exchanging currency over a series of future dates 2. In the context of currency futures, what does "basis risk" refer to? a) The risk of a change in the spread between the spot price and the futures price b) The risk of a change in interest rates affecting the value of a futures contract c) The risk of a currency moving in the opposite direction to the position held d) The risk of default by the counterparty in a futures contract 3. Which of the following is typically NOT a use of currency options? a) Hedging against adverse movements in exchange rates b) Speculating on future currency movements c) Locking in a guaranteed profit in foreign exchange transactions d) Arbitraging price differences between different markets 4. In a currency forward contract, what is the "forward premium"? a) The additional cost paid by the buyer for the right to exchange currency at a future date b) The difference between the spot exchange rate and the forward exchange rate c) The amount by which the forward exchange rate exceeds the spot exchange rate d) The fee charged by the exchange for entering into a forward contract

Among other things, the derivatives market is essentially about mitigating financial market risk, and derivative contracts are the financial instruments used for that purpose. A derivative contract derives its value or price from an underlying asset such as currency, commodities, stocks, or bonds. Derivative contracts provide opportunities for financial market participants to capture value from anticipated price movements of the underlying assets they may not directly own. In a derivative contract, the parties take positions based on their expectation of future market movements, aiming to take advantage of price fluctuations. The party that contemplates that the price of the underlying asset will rise is described as holding the long position, while the party that contemplates that there will be a decline in the price of the underlying asset is described as holding the short position. The differences in the positions of the parties can either be cash-settled or settled by physical delivery. For cash-settled derivatives, if there is an increase in the price of the underlying asset, the party holding the short position has the obligation to make payment to the party holding the long position. When there is a decrease in the price of the underlying asset, the party holding the long position has the obligation to make payment to the party holding the short position.    Read more: https://lnkd.in/d5CvC_vu #AlukoandOyebode #DerivativesMarket #FinancialRisk #DerivativeContracts #MarketMovements #UnderlyingAssets #LongPosition #ShortPosition #CashSettled #PhysicalDelivery #FinancialInstruments #MarketOpportunities #PriceFluctuations #TradingInsights #NigeriaFinance #FinancialMarkets #DerivativesTrading #InvestmentStrategies #MarketExpectations #DerivativesOverview

RBI defers implementing directions on exchange-traded forex derivatives to May 3. The circular issued by the RBI on January 5 outlined requirements for investors participating in derivative contracts, emphasizing the need for a valid underlying contracted exposure that hasn't been hedged using any other derivative contract. The underlying exposure refers to documents supporting transactions, such as order bills or receipts for exporters and importers, or documentation for remittances. #hedging #currencyderivatives

*Financial Derivatives And It's Types* Derivatives - Derivatives are financial contracts, and their value is determined by the value of an underlying asset or set of assets. Such as Stocks, bonds, currencies, commodities, and market indices are all common assets. Types of Derivatives 1) Options -: A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a specific price before a certain date. 2) Futures -: A standardized contract to buy or sell an asset at a future date for a price agreed upon now, traded on exchanges. 3) Forwards -: A contract to buy or sell an asset at a specified future date for a price agreed upon today. 4) Swaps -: This is the agreement between two parties to exchange the cash flow based on certain Predetermined Reference Entity. Such as Interest Rates, Commodity, Credit Risk etc #derivatives #options #forwards #futures #swaps #finance #investmentbanking #financialderivatives

www.sibashish.com MCQS(test your knowledge) 1.What does the term "strike price" refer to in an equity option? A) The price at which the option was originally bought B) The price at which the option can be exercised C) The price of the underlying stock at expiry D) The price of the option premium 2. Which of the following describes a "put option" in equity derivatives? A) An option to buy the underlying stock at a specified price B) An option to sell the underlying stock at a specified price C) An option that gives the holder the right to receive dividends D) An option that can only be exercised on the expiration date 3.What does "premium" mean in the context of equity options? A) The amount paid to exercise the option B) The cost of purchasing the option contract C) The profit made from selling the option D) The amount of leverage used in the option trade 4. What is meant by "in-the-money" for a call option? A) The strike price is higher than the current market price of the underlying stock B) The strike price is lower than the current market price of the underlying stock C) The option premium has decreased significantly D) The option is about to expire 5. Which type of equity derivative allows you to benefit from a rise in the price of the underlying asset? A) Put option B) Call option C) Futures contract D) Swap agreement

#Individual investors participation in the CD segment witnessed a sharp fall in April: The sharp MoM drop from 81k individuals’ investors in Mar’24 to 35k in Apr’24 can be attributed to the recent RBI regulatory guidelines on hedging foreign exchange risk that prohibits trading in exchange-traded currency derivatives unless there is a valid underlying contracted exposure to trade. Individual investor participation showed a rising trend starting from January 2017, peaking in November 2022 with 1.2 lakh active investors. This was followed by a 10- month period during which the number of individual investors’ participation fluctuated between 90,000 and 1.2 lakh. However, since August 2023, participation declined for four consecutive months, reaching 81,304 in November 2023, marking the lowest level in two years. Although there was a brief increase in the subsequent two months, the segment again saw a decline in individual investors’ participation in Feb’24 and Mar’24.

NSE to launch derivative contracts on Nifty Next 50 index. Details here