Reading 69: Forward Markets and Contracts-LOS a 习题精选 2011, default, contract, forward

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Session 17: Derivatives
Reading 69: Forward Markets and Contracts

LOS a: Explain delivery/settlement and default risk for both long and short positions in a forward contract.

 

 

Default risk in a forward contract:

A) only applies to the short, who must make the cash payment at settlement.

B) is the risk to either party that the other party will not fulfill their contractual obligation.

C) only applies to the long, and is the probability that the short can not acquire the asset for delivery.

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Default risk in forward contracts is the risk to either party that the other party will not perform, whether that means pay cash or deliver the asset.

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The short in a forward contract:

A) has the right to deliver the asset upon expiration of the contract.

B) is obligated to deliver the asset upon expiration of the contract.

C) is obligated to deliver the asset anytime prior to expiration of the contract.

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The short in a forward contract is obligated to deliver the asset (in a deliverable contract) on (or close to) the expiration date.

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The party to a forward contract that is obligated to purchase the asset is called the:

A) short.

B) long.

C) receiver.

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The long in a forward contract is obligated to buy the asset (in a deliverable contract). The term receiver is used with swaps.

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Which of the following statements about forward contracts is least accurate?

A) A forward contract can be exercised at any time.

B) The long promises to purchase the asset.

C) Both parties to a forward contract have potential default risk.

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Forward contracts typically require a purchase/sale of the asset on the expiration/delivery date specified in the contract. The other statements are true.

luqian55

thanks a lot