It can be inferred from the text that

(A) the underlying asset to a financial futures contract can be commodities, currencies, securities.

(B) a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today but with delivery occurring at a specified future date.

(C) most financial futures contracts are traded over-the-counter.

(D) forwards are highly standardized, being exchange-traded, whereas futures can be unique, being over-the-counter..

 

5. Judging by what you have derived from the text, which do you think of the following is the best to define the term ‘option’?

(A) It gives the right, but not obligation, to buy stocks in the future at a particular price, but probably higher than the current market price.

(B) It is a financial product whose value depends on another financial product.

(C) It is an arrangement to exchange interest rates or currencies.

(D) It specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction.

 

6. Judging by what you have derived from the text, how do you think ‘index option’ can be described?

(A) A statistical measure of change in an economy or a securities market.

(B) A call or put option on a financial index.

(C) A futures contract on a stock or financial index.

(D) An option with a built in mechanism to expire worthless should a specified price level be exceeded.