Question 1

The two components of risk in a commodities futures portfolio are:

Options :

A : Changes in the convenience yield and storage costs

B : Changes in spot prices and carrying costs, also called commodity lease rates

C : Changes in interest rates and spot prices

D : The risk from change in basis and interest rates

Answer: B

Question 2

Which of the following portfolios would require rebalancing for delta hedging at a greater frequency in order to maintain delta neutrality?

Options :

A : A portfolio with a low delta and high vega

B : A portfolio with a high gamma

C : A portfolio with a high delta and low gamma

D : A portfolio with a low gamma

Answer: B

Question 3

A fund manager buys a gold futures contract at $1000 per troy ounce, each contract being worth 100 ounces of gold. Initial margin is $5,000 per contract, and the exchange requires a maintenance margin to be maintained at $4,000 per contract. Prices fall the next day to $980. What is the margin call the fund manager faces in respect of daily variation margin ?

Options :

A : $1000

B : $2000

C : $7000

D : $0

Answer: B

Question 4

A US treasury bill with 90 days to maturity and a face value of $100 is priced at $98. What is the annual bondequivalent yield on this treasury bill?

Options :

A : 8.16%

B : 8.11%

C : 8.28%

D : 8.00%

Answer: C

Question 5

If interest rates and spot prices stay the same, an increase in the value of a call option will be accompanied by:

Options :

A : a decrease in the value of the corresponding put option

B : an indeterminate change in the value of the corresponding put option

C : an increase in the value of the corresponding put option

D : no impact in the value of the corresponding put option

Answer: C

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