Reading 71: Option Markets and Contracts-LOS e 习题精选 2011, following, include, border

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Session 17: Derivatives
Reading 71: Option Markets and Contracts

LOS e: Identify the types of options in terms of the underlying instruments.

 

 

Financial options include all of the following EXCEPT options on:

A) interest rates.

B) foreign currencies.

C) futures.

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Options on futures are considered a separate type of options.

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An option to buy Mexican pesos is:

A) a currency option.

B) an exchange rate option.

C) a foreign option.

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Options on foreign currencies are called currency options and cover a specific number of foreign currency units.

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Which of the following statements regarding interest-rate options is least accurate?

A) They are based on a fixed income security.

B) Call option values move in the same direction as interest rates.

C) They are based on a specific interest rate rather than a bond.

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Treasury bond or bill options are options on fixed income securities. Interest rate options are based on a specific reference rate and interest rate calls have positive payoffs when the reference rate is above the rate specified in the contract.

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An option is settled in cash, with nothing delivered. The long payoff is the difference between the security value and the strike price, multiplied by a contract multiplier. The option is a(n):

A) commodity option.

B) futures option.

C) index option.

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Options on stock indexes are only settled in cash and require a multiplier to determine the payoff. Futures options give the holder the right to buy or sell a futures contract, but require no multiplier. Commodity options give the holder the right to buy or sell physical goods.

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