CHARTERED INSTITUTE FOR

SECURITIES & INVESTMENT

R
PE
LEVEL 3
PA
DERIVATIVES
E
PL

TIME ALLOWED: 2 HOURS

M
SA

No copying of any part of this paper is permitted without the prior written
authority of the Chartered Institute for Securities & Investment

© Chartered Institute for Securities & Investment

How to use this sample paper

These 100 questions should be answered in two hours in the real exam, so make sure you time
yourself accurately.

Record your answer for each question by circling your selected answer.

When you have finished the test, you may check your answers against the Answer Sheet at the back
of this paper.

The exam is scored as follows:

70-100 Pass

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0-69 Fail

PE
For those questions you answered incorrectly, the answer sheet will show you the corresponding
syllabus element, sub element and learning objective against which the questions were written, so
you can identify any syllabus areas where you may need to revise further.
PA
E
PL
M
SA
Derivatives (Level 3)

1 An investor buys a 480 put in XYZ plc shares for 15p and sells a 520 put at 30p. What is the
investor's net profit or loss per share if the price of these shares at expiry is 460p?

A Loss of 15p

B Loss of 25p

C Profit of 15p

D Profit of 25p

R
2 In the event of a default by a member which of the following would be first utilised by the
clearing house against the outstanding liabilities?

PE
A Insurance policy

B Default fund PA
C Default member's margin

D Default member's contributions to default fund

E

3 The value of a put option increases if the:

PL

A price of the underlying asset decreases

B strike price decreases

C volatility of the underlying asset price decreases

M

D risk-free rate decreases

SA
Derivatives (Level 3)

4 The Exchange Delivery Settlement Price is often set on the delivery date via an auction process.
Why is this?

A In order to reduce the possibility of price manipulation

B As a way of taking adjustments such as accrued interest and storage into account

C In order to obtain the highest settlement prices

D As a way of taking earlier losses and profits into account

R
5 A key difference between flex options and standard exchange traded options is that a flex
option:

PE
A has limited expiration dates

B requires physical delivery PA

C is available only on commodities

D has customised strike prices

E

6 The minimum price movement on a future contract is known as the:

PL

A tick

B spread

C series
M

D class
SA
Derivatives (Level 3)

7 In order to create a delta neutral portfolio, a long underlying position can be hedged by a
short:

A at-the-money call

B at-the-money put

C deep-in-the-money call

D deep-in-the-money put

R
8 Which ONE of the following is a primary use of a forward rate agreement?

PE
A A continuing hedge against the upward movement of interest rates

B An arbitrage opportunity against mispricing in the Government bond markets

C An opportunity to speculate on the movement of long term interest rates

D
PA
A protection for a definitive period against adverse interest rate changes

9 The IASB considers fair value of a derivative to be:

E
PL

A the current market price

B cost of carry plus the current value

C a discounted maturity value

M

D the cost of carry

SA
Derivatives (Level 3)

10 A yield curve represents the relationship between:

A interest rates and credit risk

B interest rates of two currencies

C interest rates and bond maturities

D interest rates on government and non-government bonds

R
11 The cost of carry for an index future will include which of the following?

A Tax implications

PE
B Transaction costs

C Initial margin requirement

D Current interest rates

PA
12 The 'cost of carry' in relation to futures normally increases as a result of:
E

A increases in interest rates and decreases in contract size

PL

B decreases in interest rates and increases in contract size

C increases in interest rates and increases in contract size

D decreases in interest rates and decreases in contract size

M
SA
Derivatives (Level 3)

13 An institutional investor believes that there will be a large movement in the price of a
particular share, but is unsure of the director of this movement. Which one of the following
strategies would be MOST suitable in these circumstances?

A Short straddle

B Long straddle

C Bull call spread

D Bear put spread

R
14 In London, Zinc and Tin futures contracts are traded on:

PE
A the LME

B the LSE PA
C ICE

D NYSE Liffe
E

15 Which set of information could be used to price a foreign exchange (FX) swap?
PL

A The interest rates of both of the swap currencies

B Counterparty credit rating and spot FX rates

C Credit curves and interest rates

M

D Interest rates and counterparty credit rating

SA
Derivatives (Level 3)

16 Which ONE of the following is prohibited under Commodity Futures trading Commission (CFTC)
part 30?

A A regulated US firm taking an order for an ICE Futures Gas Oil options trade from a
resident in the US without a CFTC Part 30 exemption

B A regulated UK firm taking an order for an ICE Futures Gas Oil options trade from a
resident in the US with a CFTC Part 30 exemption

C A regulated UK firm soliciting for orders from a resident in the US with the CFTC Part 30
exemption

D A regulated UK firm taking an order for an ICE Futures Gas Oil options trade from a

R
resident in the US without a CFTC Part 30 exemption

PE
17 Which ONE of the following is an advantage of using an OTC derivative over an exchange
traded one? PA
A Reduced credit risk

B Flexible maturity dates

C Increased market liquidity

E

D Standardised contract sizes

PL

18 Clearing for which of the following types of swap is MOST likely to take place through
SwapClear?
M

A Credit default
SA

B Interest rate

C Overnight index

D Constant maturity
Derivatives (Level 3)

19 An investor is taking out a Flex option on the FTSE100 index on ICE Futures Europe and would
like to customise both the exercise price and the expiry date. Which of these two requirements
are possible (if either)?

A Only the exercise price

B Only the expiry date

C Both

D Neither

R
20 The market liquidity measure that gives the total number of contracts that are not offset by

PE
opposite contracts or are not closed for delivery is known as:

A gearing

B leverage
PA
C open interest

D trading volume
E

21 If you simultaneously sell a call with a strike of 260p and sell a put with a strike of 240p on the
PL

stock of XYZ plc with the same expiration month, what is the resulting position usually called?

A Long straddle
M

B Long strangle

C Short straddle
SA

D Short strangle
Derivatives (Level 3)

22 What effect does spot month margining have?

A Initiates a maintenance margin call

B Initiates an additional intra-day margin call

C Increases the initial margin

D Increases the variation margin

R
23 Which of the following describes a market in which only the bid and ask offers of designated
market makers, dealers or specialists are displayed?

PE
A Order driven

B Quote driven

C Price driven

D Amount driven
PA
24 Despite having sufficient funds, a derivatives trader is finding it difficult to buy a particular
E

contract in order to close out an open position.

PL

This problem is an example of the realisation of what type of risk?

A Credit risk
M

B Settlement risk

C Systemic risk
SA

D Liquidity risk
Derivatives (Level 3)

25 One of the key potential consequences of the FLEX facilities offered by exchanges is:

A absence of credit exposure

B increased trading volumes

C fast track novation

D minimal margin requirements

R
26 A change in the number of shares available under a warrant can typically be triggered by which
ONE of the following:

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A a dividend declaration in respect of the underlying shares

B a sudden fall in the price of the underlying shares

C a downgrading of the underlying shares by an independent third party

D
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a share split carried out by the issuer of the underlying shares

27 Twenty points have been quoted for a particular forward FX trade. This represents the
E

difference between:
PL

A the spot price and the forward outright rate

B the spread for the spot bid and offer prices

C the relative premium of forward delivery vs any discount

M

D the base currency's forward price and that of the traded currency
SA
Derivatives (Level 3)

28 A firm received an assignment notice regarding an option from a clearing house.

The company should now be aware that:

A they will receive the profits from the transaction within the standard settlement period

B they have to deliver the underlying assets or settle the transaction in cash

C their counterparty is insolvent and the clearing house appointed a liquidator

D they have to pay a fine for causing delays in the clearing process

R
29 Which of the following statements about margining on US and UK exchanges and clearing

PE
houses is TRUE?

A US and UK exchanges and clearing houses margin on a net basis

B US and UK exchanges and clearing houses margin on a gross basis

PA
C US exchanges and clearing houses margin on a gross basis and UK exchanges and clearing
houses margin on a net basis

D US exchanges and clearing houses margin on net basis and UK exchanges and clearing
houses margin on a gross basis
E
PL

30 A bond is unexpectedly downgraded. What happens to its yield?

A It goes up
M

B It goes down
SA

C It stays the same

D It falls to zero
Derivatives (Level 3)

31 The primary purpose of 'position limits' is to:

A minimise the extent of counterparty risk

B prevent traders from manipulating the market

C stabilise sudden and extreme movements in price

D ensure that sufficient variation margins are collected

R
32 If an investor buys a put on a company's shares and simultaneously sells a put with a higher
strike price on the same shares with the same expiration date, the trade the investor has
entered into is called a:

PE
A horizontal spread

B bull put spread PA

C diagonal spread

D bear put spread

E

33 An investor writes a 1500 put on the January robusta coffee futures for a premium of 10, which
are trading at 1520. Shortly after, two major coffee producers announce record harvests and
PL

the futures price drops to 1400. Assuming that the options are exercised just after the news,
the investor will:

A suffer a loss of 110 per contract

M

B suffer a loss of 90 per contract

C make a profit of 100 per contract

SA

D make a profit of 90 per contract

Derivatives (Level 3)

34 What type of netting, if any, is covered by a typical master agreement?

A Master Agreements do not allow any type of netting

B Payment netting only

C Close-out netting only

D Both payment and close-out netting

R
35 Which of the following options can be exercised ONLY on expiry date?

A A Bermuda option

PE
B A Barrier option

C A European option

D An American option
PA
36 For which of the following types of option will gamma be at its smallest?
E

A Deep out-of-the-money put options

PL

B Near the money call options

C Near the money put options

D At-the-money call options

M
SA
Derivatives (Level 3)

37 XYZ Bank has requested a higher level of collateral to protect its position.

This is similar to:

A exercising an option

B registering a further interest

C applying an adjustment

D making a margin call

R
38 Clearing houses guarantee the performance of which types of trade carried out by its

PE
members?

A Options, swaps and forwards only

B Swaps, forwards and futures only

PA
C All trades except those involving Bermuda options

D All trades traded on the exchange

E

39 Under Commodity Futures Trading Commission Part 30, what types of derivative transactions
PL

by US customers are allowed?

A Futures and options transactions on US exchanges only for all US customers

M

B Futures and options transactions on non-US exchanges for all US customers

C Futures and options transactions on all exchanges for all US customers

SA

D Only futures and options transactions for commercial purposes

Derivatives (Level 3)

40 Which ONE of the following BEST describes the unique feature of a convertible bond?

A It can be redeemed early by either party

B It can be converted into cash

C It can be converted to equity in the issuing company

D It can be converted into another grade of debt

R
41 The date on which a vanilla interest rate swap stops accruing interest for final settlement is
referred to as the:

PE
A Settlement Date

B Termination Date

C Value Date

D Fixing Date
PA
42 When can dealings continue after a counterparty has used up its credit line with a dealer?
E
PL

A If the counterparty has a sufficiently high credit rating

B If the counterparty puts up collateral to cover the additional business

C If the dealer reduces another counterparty's credit line to compensate

M

D It is not allowed to continue dealing if its credit line has been used up
SA
Derivatives (Level 3)

43 In the delivery of an LME copper future contract what is the warrant?

A An invoice to the buyer, giving the exact amount that must be paid

B A document that gives the holder the right to take possession of the copper

C A document that gives the delivery details to the seller

D A receipt that allows the seller to receive the payment via the Protected Payments System

R
44 In an open outcry market, which party initiates the first stage of the order flow process?

A The broker

PE
B The counterparty

C The clearing house

D The customer
PA
45 The 'principal to principal' guarantee in the clearing process refers to the legal relationship
between:
E
PL

A the Clearing House and an executing broker

B the executing broker and its client

C the Clearing Member and a non-Clearing Member

M

D the Clearing House and the Clearing House Member

SA
Derivatives (Level 3)

46 Which of the following is NOT a type of contract in the foreign exchange market?

A Forward

B Option

C Spot

D Premium

R
47 In futures pricing, basis is defined as the difference between:

A cost of carry and the future price

PE
B the spot price and cost of carry

C the cash price and the future price

D the future price and the option price

PA
48 An investor buys calls on a stock. What is his maximum potential loss?
E

A Unlimited
PL

B The premium

C The strike price

D The strike price less the premium

M
SA
Derivatives (Level 3)

49 A bond fund manager holds GBP 33,000,000 nominal of the cheapest to deliver (CTD) bond.
The price factor of the CTD is 0.83 and the contract size of the future is 100,000. He fears that
interest rates will rise.

What should he do in order to hedge his position?

A Sell 274 long UK government bond future contracts

B Sell 330 long UK government bond future contracts

C Sell 398 long UK government bond future contracts

D Buy 330 long UK government bond future contracts

R
PE
50 Under which type of derivative is the settlement price based on the relevant month's HDD or
CDD?

A Livestock
PA
B Cocoa

C Weather

D Emissions
E
PL

51 The market suddenly becomes highly volatile. Which of the following may the clearing house
call in order to reduce the increased risk exposure?
M

A Intra-day margin

B Spot month margin

SA

C Initial margin

D Variation margin
Derivatives (Level 3)

52 Principles-based regulation means:

A detailed rule books which must be followed

B broad based standards to which firms must adhere

C broad based standards to which firms adhere on a voluntary basis

D detailed rule books to which firms adhere on a voluntary basis

R
53 Which ONE of the following would BEST be described as speculating?

A An investor anticipates that the price of aluminium will fall and therefore sells several LME

PE
aluminium futures

B An investor goes long of a June 1500 lead call at a premium of 120 and, at the same time
goes short the same number of June 1400 lead puts at a premium of 90
PA
C A manufacturer anticipates a rise in the price of copper and buys copper futures to meet
its production quota

D An investor who is long of tin puts anticipates a rise in the market and therefore liquidates
his position
E
PL

54 The main financial markets regulator in India is the:

A Financial Conduct Authority

M

B Securities and Exchange Commission

C Securities and Exchange Board

SA

D Monetary Authority
Derivatives (Level 3)

55 What are the most common maturities of a Certificate of Deposit?

A 1 and 2 months

B 3 and 6 months

C 1 and 2 years

D 2 and 3 years

R
56 A fund manager decides that his UK fund is overweight in equities and underweight in
Government Bonds. He decides to redress the balance by using futures.

PE
Which ONE of the following courses of action would be the MOST appropriate for him to take?

A Buy long UK government bond futures and buy FTSE 100 index futures

B Buy long UK government bond futures and sell FTSE 100 index futures
PA
C Sell long UK government bond futures and sell FTSE 100 index futures

D Sell long UK government bond futures and buy FTSE 100 index futures
E

57 UK Treasury bonds with coupon and principal payments limited to movements in retail prices
PL

are generally known as:

A index linked UK government bonds

M

B floating rate treasury notes

C strippable bonds
SA

D TIPS
Derivatives (Level 3)

58 In relation to call options, if the current market price of the underlying asset increases, this will
normally result in:

A an increase in the premium

B a decrease in the premium

C an increase in the strike price

D a decrease in the strike price

R
59 An investor gives a market if touched buy order at the price of 537p per futures.

PE
Which of the following statements is TRUE if the order is executed?

A The order will always be filled at a higher price than 537p

B The order will always be filled at the price of 537p

PA
C The order will always be filled at a lower price than 537p

D The order can be filled at 537p or at a higher or lower price

E

60 An equity portfolio's beta, which was calculated for hedging purposes, will normally be:
PL

A the mean of the highest and lowest betas of the individual shares

B the weighted average of the individual betas of all the shares

M

C the highest beta of all the individual shares

D the lowest beta of all the individual shares

SA
Derivatives (Level 3)

61 For which of the following transactions will margin NOT normally be required to be paid?

A Buying futures

B Long option positions

C Short option positions

D Selling futures

R
62 Why might a trader wish to ensure that his book is delta neutral?

PE
A To hedge the directional risk of the options position

B To make a profit on a rising market

C To make a profit on a falling market

D
PA
To net all positions through the central counterparty

63 What is the "cost of carry"?

E

A The initial margin paid by the investor when buying a future

PL

B The variation margin paid by the investor when holding a future

C The net cost of buying and holding a position until a set date

D The risk free rate

M
SA
Derivatives (Level 3)

64 What sort of firm may a non-clearing member use to clear its trades via a Clearing House?

A Only a general clearing member

B Only an individual clearing member

C Any clearing member but not a non-clearing member

D Any clearing member or a non-clearing member with sufficient capital

R
65 What is the final opportunity that holders of long UK government bond future positions have
to close their positions and therefore avoid ultimate delivery?

PE
A Last Notice Day

B The day prior to Assignment Day

C Last trading day

D
PA
3 business days prior to the start of the delivery month

66 Which ONE of the following regarding the valuation (for exercise purposes) of European
E

Options is TRUE?
PL

A It is valued at a series of dates, any of which may become the Exercise Date

B It is valued at the Expiration Date as an average of the values throughout the Exercise
Period
M

C It is valued and exercisable on any day up to the Expiration Date

D It is valued and exercised only on the Expiration Date

SA
Derivatives (Level 3)

67 What is the price determined by the exchange for the closing out of the futures position and
the calculation of the final value for the cash or physical settlement?

A Exchange Delivery Settlement Price (EDSP)

B Exchange of Futures for Physical Price (EFPP)

C Exchange Traded Price (ETP)

D Exchange Traded Derivative (ETD)

R
68 Gearing allows speculators in the futures market to:

PE
A avoid physical delivery of the underlying asset

B reduce their counterparty exposure

C buy the underlying cheaper in the OTC market

D
PA
pay only a fraction of a contract's value upfront

69 Which events would be detailed in a typical master agreement?

E
PL

A both termination events and default events

B termination events but not default events

C default events but not termination events

M

D neither termination events nor default events

SA
Derivatives (Level 3)

70 At expiry, which ONE of the following groups of options might be exercised automatically?

A All in-the-money options

B All at-the-money and in-the-money options

C All European options

D All open options

R
71 Which ONE of the following best describes a call option?

A The right, but not the obligation, to buy an asset at a given price on or before a given date

PE
B The right, but not the obligation, to sell an asset at a given price on or before a given date

C A traded option contract that can be bought or sold in the market at any time during its
life

D
PA
The obligation to buy an asset at a given price on or before a given date

72 ABC plc has 6.5% cumulative preference shares in issue listed on a Stock Exchange. It has paid
E

no dividend on them for the last five years.

PL

Which ONE of the following is TRUE?

A The exchange listing of the preference shares would be temporarily suspended

M

B In the event of the company winding up the preference shareholders would rank ahead of
bond holders

C The preference shareholders remain entitled to all of their unpaid dividends

SA

D The preference shareholders could force the company into liquidation to reclaim
outstanding dividends
Derivatives (Level 3)

73 A purchase of a September long UK government bond future and a sale of a December long UK
government bond future is an example of which type of spread transaction?

A Intra market spread

B Inter market spread

C Ratio spread

D Bear spread

R
74 A company doing a hedge transaction wishes to minimise counterparty exposure in their
derivatives portfolio. They should do this by which ONE of the following?

PE
A A combination of long ETD and short OTC contracts

B Avoid all derivative contracts, since all carry counterparty risk

PA
C ETD contracts only

D OTC contracts only

E

75 What is the correct definition of a 'house account'?

PL

A A brokerage account from which a cash balance is automatically transferred into an

interest-bearing investment

B A separate account designated to hold client money

M

C A brokerage account into which a customer is required to pay the full amount of securities
purchased
SA

D An account created by a brokerage for its own use

Derivatives (Level 3)

76 What is the advantage of dual capacity markets?

A Clients can obtain the best possible price

B Brokers can offer the best bid-offer spread

C Brokers can offer the lowest commission rates

D Clients can reduce the costs of dealing

R
77 Which ONE of the following commodities is classed as an agricultural commodity?

A Cocoa

PE
B Soya beans

C Sugar

D Coffee
PA
78 You have created a bull call spread through a purchase of a call with strike 80 for 6p and a sale
of a call with strike 90 for 2p (both options have the same expiry date).
E

What is the maximum loss you would incur in this position?

PL

A 2p

B 4p
M

C 6p

D 10p
SA
Derivatives (Level 3)

79 A future is trading above its fair value. What type of trade would an arbitrageur undertake?

A Short hedge

B Long hedge

C Reverse cash and carry

D Cash and carry

R
80 Which of the following statements concerning time value is TRUE?

A The longer the time remaining until expiry, the smaller the time value

PE
B The series in the near month always has the highest amount of time value

C The longer the time remaining until expiry, the higher the time value

D There is no difference in time value between a near month series and a far month series
PA
81 The clearing house acts as:
E

A central depository for all securities

PL

B counterparty for all transactions

C prime broker for the exchange

D price giver for all stocks traded on the exchange

M
SA
Derivatives (Level 3)

82 Which of the following BEST describes an option premium?

A The price of an option agreed by the buyer and seller

B The price at which the underlying is supplied by a writer, who has been exercised against

C The price at which the buyer of a call option may buy, or the buyer of a put option may
sell, the underlying

D The amount of money given to the clearing house as margin by the writer of an option

R
83 What key event normally occurs during the first 90 seconds of the 'settlement range' in
connection with futures contracts?

PE
A The spread levels are monitored

B The weighted average prices are determined

PA
C The trading is temporarily suspended

D The prices are artificially lowered

E

84 What is normally the LATEST premium settlement date for OTC options?
PL

A T+2

B T+3

C T+4
M

D T+5
SA
Derivatives (Level 3)

85 Where a 'market order' for a derivative is made, the order will normally be executed at:

A the stated price or better (as soon as this can be achieved)

B the stated price or better (or abandoned if not immediately available)

C the first price available

D the best price immediately available

R
86 The strategy that involves selling a put and a call with the same expiry, strike prices and
underlying asset, is known as a:

PE
A long strangle

B long straddle

C short strangle

D short straddle
PA
87 Where an investor swaps a floating rate note for a fixed interest investment, this is normally
E

described as:
PL

A a constant maturity swap

B an asset swap

C an accreting swap
M

D a forward start swap

SA
Derivatives (Level 3)

88 Which of the following transactions operate 'off market'?

A Exchange for Physical (EFP) only

B Exchange for Swaps (EFS) only

C Both Exchange for Physical (EFP) and Exchange for Swaps (EFS)

D Neither Exchange for Physical (EFP) nor Exchange for Swaps (EFS)

R
89 Which of the following statements is CORRECT in respect of UK Treasury Bills?

A They pay no coupon and have a maturity of either 91 days or 182 days

PE
B They generally pay fixed coupons and have a maturity of either 28 days or 91 days

C They generally pay fixed coupons and have a maturity of either 91 days or 182 days

D They pay no coupon and have a maturity of either 28 days or 91 days

PA
90 Which of the following statements is CORRECT in respect of the trading of corporate bonds?
E

A Corporate bonds trading takes place on major exchanges only

PL

B The majority of corporate bonds trading takes place in decentralised, dealer-based, over-
the-counter markets; a limited amount of dealing takes place on major exchanges

C Corporate bonds dealing is equally split between major exchanges and decentralised,
dealer-based, over the counter markets
M

D The majority of corporate bonds dealing takes place on major exchanges, with some
dealing on decentralised, dealer-based, over the counter markets
SA
Derivatives (Level 3)

91 When taking a short position in a futures contract combined with an equal long position in the
cash market, an investor is exposed to which type of risk?

A Mismatch

B Interest rate

C Basis

D Credit

R
92 Which ONE of the following is TRUE of ordinary share voting rights?

PE
A Shareholders may not delegate their voting rights at company annual general meetings

B Shareholders voting by proxy may also vote in person at extraordinary general meetings

C The number of votes is in direct proportion to the number of shareholders voting

D
PA
Voting shareholders take an active part in a company's decision making process

93 Which of the following statements is usually TRUE about prime brokerage services.
E

The prime broker:

PL

A provides the hedge fund with guaranteed starting capital through its capital introduction
services
M

B provides risk analysis technology through its risk management advisory services

C raises the listed capital of the hedge fund by providing stock lending services to meet the
SA

regulatory capital requirements

D makes the regulatory requirements more understandable through its clearing services
Derivatives (Level 3)

94 A type of investment where a stream of cash flows is exchanged for another is known as?

A A forward

B An option

C A swap option

D A swap

R
95 Which of the following is TRUE of Over-the-Counter instruments?

A They are traded in share shops

PE
B They are traded on regulated exchange floors

C They are traded on automated trading exchanges

D They are any non-exchange traded instrument

PA
96 When a broker is NOT a direct member of an exchange which of the following methods could
be used to execute a client's trade?
E
PL

A An order routing service offered by an exchange member

B LIFFE CONNECT

C A broker who can allocate and claim exchange orders

M

D A broker who has access to a clearing account

SA
Derivatives (Level 3)

97 An order to trade immediately at the price prevailing is known as which ONE of the following?

A Market order

B Fill or Kill order

C Limit order

D Good 'Till Cancelled order

R
98 Where a warrant is attached to a corporate bond, what happens to the bond if the warrant is
exercised?

PE
A It expires

B It continues to exist as a bond

C It converts to a normal equity

D
PA
It converts to a non-dividend paying equity

99 Which of the following is a characteristic of a Contract for Difference?

E
PL

A The invoicing amount at delivery is based on the price differential between two related
commodities

B The intermonth spreads are margined differently from an outright position

C The futures seller has an option to deliver a different quality of commodity and invoicing is
M

achieved via conversion factors

D The open positions at expiry do not go to delivery but are simply marked to market
SA
Derivatives (Level 3)

100 As part of the clearing mechanism, an authorised warehouse issued a warrant and this was
recorded on the SWORD delivery system. Which one of the following asset classes is MOST
likely to be involved?

A Agricultural

B Metals

C Softs

D Exotics

R
PE
PA
E
PL
M
SA
Derivatives (Level 3)

Question Number Answer Syllabus Reference

1 B 8.6.1
2 C 6.1.4
3 A 4.2.2
4 A 7.1.1
5 D 5.1.9
6 A 1.1.1
7 C 8.4.6
8 D 5.1.1
9 A 4.1.1

R
10 C 2.3.4
11 D 4.1.2
12 C 4.1.2

PE
13 B 8.6.3
14 A 3.1.1
15 A 5.1.3
16 D 9.3.4
17 B 8.5.1
18
PA
B 5.10.1
19 C 1.1.8
20 C 1.1.6
21 D 8.3.4
22 C 6.2.3
E

23 B 1.1.10
24 D 1.1.4
25 B 3.2.3
PL

26 D 2.4.4
27 A 2.2.3
28 B 7.2.1
29 C 9.3.2
M

30 A 5.1.7
31 B 6.4.1
32 B 8.3.3
SA

33 B 8.6.2
34 D 5.2.1
35 C 7.2.1
36 A 4.2.4
37 D 5.3.1
38 D 7.1.3
39 B 9.3.4
40 C 5.7.1
41 B 5.1.2
42 B 6.3.2
43 B 7.1.3
44 D 4.3.1
45 D 6.1.4
46 D 2.2.2
 47 C 4.1.4
48 B 1.1.4
49 A 8.4.2
50 C 2.8.1
51 A 6.2.4
52 B 9.2.2
53 A 8.1.1
54 C 9.1.1
55 B 2.1.3
56 B 8.4.1
57 A 2.3.2
58 A 5.8.2
59 D 4.3.3

R
60 B 8.4.4
61 B 6.2.1
62 A 4.2.5

PE
63 C 4.1.2
64 A 6.1.5
65 C 7.1.2
66 D 5.8.1
67 A 3.3.4
68
PA
D 1.1.5
69 A 5.2.1
70 A 7.2.2
71 A 1.1.2
72 C 2.4.2
E

73 A 8.2.1
74 C 8.5.1
75 D 3.3.3
PL

76 A 4.3.2
77 B 2.5.1
78 B 8.3.5
79 D 4.1.5
M

80 C 4.2.1
81 B 3.1.2
82 A 4.2.1
SA

83 A 6.2.2
84 A 5.8.3
85 D 3.2.1
86 D 8.3.4
87 B 5.1.6
88 C 3.2.2
89 A 2.1.1
90 B 2.3.5
91 C 8.4.5
92 D 2.4.1
93 B 6.1.7
94 D 5.1.4
95 D 1.1.7
96 A 4.3.1
 97 A 4.3.3
98 B 2.4.3
99 D 1.1.1
100 B 3.3.5

R
PE
PA
E
PL
M
SA