Practice Set - 2 | Practice Set | NISM Series VIII: Equity Derivatives Certification Examination

Question 1

A derivative market participant enters into a position expecting price decline. What position is this?

Question 2

A trader enters into a derivative contract whose value fluctuates based on an underlying commodity price. Which key characteristic defines this contract?

Question 3

An arbitrageur observes a price difference for the same asset in two markets. What is the most appropriate action?

Question 4

Which of the following risks is minimized in exchange-traded derivatives but remains significant in OTC markets?

Question 5

Which factor most significantly contributes to the growth of derivatives markets?

Question 6

A derivative contract where both parties are obligated to perform is:

Question 7

A speculator takes a position in derivatives expecting price movement without owning the underlying. This behavior primarily contributes to:

Question 8

A derivative contract traded on an exchange requires margins from both parties. What is the primary purpose of this requirement?

Question 9

Which of the following is a limitation of forward contracts?

Question 10

Which of the following is true regarding derivatives?

Question 11

Which of the following contributes most to market efficiency?

Question 12

In a scenario where a hedger uses derivatives to manage risk, which of the following best describes the objective?

Question 13

Operational risk in derivatives trading can arise due to:

Question 14

Which of the following best differentiates futures from forwards?

Question 15

Which situation best illustrates counterparty risk in a forward contract?

Question 16

A trader uses derivatives without holding the underlying asset. This is known as:

Question 17

A corporate entity enters into a derivative contract to lock in future prices of raw materials. This is an example of:

Question 18

Which risk is associated with unfavorable changes in asset prices?

Question 19

Which of the following best describes the role of clearing corporations?

Question 20

Which of the following best explains the concept of price discovery in derivatives markets?

Question 21

Which of the following best explains why derivatives markets improve liquidity?

Question 22

A forward contract is considered illiquid primarily because:

Question 23

Which of the following scenarios best represents liquidity risk?

Question 24

A trader prefers OTC derivatives over exchange-traded ones. What is the most likely reason?

Question 25

Practice Set - 2