MBA Forwards Futures Very Short Sample Model Paper

MBA Forwards Futures Very Short Sample Model Paper

MBA Forwards Futures Very Short Sample Model Paper

MBA Forwards Futures Very Short Sample Model Paper

MBA Forwards Futures Very Short Sample Model Paper
MBA Forwards Futures Very Short Sample Model Paper

Forwards and futures: forward contract, Features of forward contracts, Futures contract, Types ,Functions, Distinction between futures and forward, Pricing of futures contract, currency futures, Hedging in of futures, Cost of carry model, Application of market index, Index futures in the stick market, Indian derivatives market.

Section A

VERY SHORT ANSWER QUESTIONS

Q.1. What do you mean by futures contract?

Ans. A futures contract is an agreement between two parties to buy or sell an asset at a certain time in future at a certain price.

Q.2. What is futures price?

Ans. The price at which the futures contract trades in the futures market is called futures price.

Q.3. What is currency futures?

Ans. Currency futures can be defined as ‘a binding obligation to buy or sell a particular currency against another at a designated rate of exchange on a specified future date’

Q.4. What is interest rate futures?

Ans. An interest rate futures contract is an agreement to buy or sell a standard quantity of specific interest bearing instruments at a predetermined future date and at a price agreed upon between the parties.

Q.5. What is stock futures?

Ans. Stock futures are agreements to buy or sell a specified stock, i.e. the equity share of a specified company in the future at a specified price.

Q.6. What is financial futures contract?

Ans. A financial futures contract is a standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date.

Q.7. Write the names of some financial futures.

Ans. Some of the financial futures are:

  1. Currency futures.
  2. Interest rate futures.
  3. Stock index futures.
  4. Stock futures.

Q.8. What do you mean by hedge?

Ans. Hedge means making an investment to reduce the risk of adverse price movements in an asset.

 Q.9. What is anticipatory hedge?

Ans. A hedge position taken in anticipation of a future buy or sell transaction is anticipatory hedge. It is used when an investor intends on entering the market and wants to reduce risk by taking a long or short position in the target security,

 Q.10. What is hedge ratio?

Ans. Hedge ratio is the ratio of the size of the position taken in futures contracts to the size of the position taken in futures contracts to the size of the exposure.

 Q.11. What is market order?

Ans. A market order is a buy or sell order to be executed immediately at current market price.

 Q.12. What is limit order?

Ans. A limit order is an order to buy or sell a stock at a specific price.

 Q.13. What is stop order?

Ans. A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price. It is also known as stop loss order.

 Q.14. What is clearing margin?

Ans. Clearing margin is financial safeguard to ensure that companies or corporations perform on their customers open futures and options contracts.

 Q.15. What are the two important concepts in futures trading?

Ans. Two important concepts in futures trading are:

  1. Basis: It is the relationship between the cash and futures price.
  2. Convergence: It is the narrowing spread between the spot and derivative price.

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