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LOS a: Differentiate between the positions held by the long and short parties to a forward contract in terms of delivery/settlement and default risk.
Q1. 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.
Q2. 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.
Q3. The party to a forward contract that is obligated to purchase the asset is called the:
A) long.
B) short.
C) receiver.
Q4. 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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发表于 2009-3-2 09:40
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