BekaertHodrick_TB_Ch20 - Chapter 20 Foreign Currency Futures and Options

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Chapter 20
Foreign Currency Futures and Options


20.1 A major difference between foreign currency futures contracts and forward contracts is that forward contracts are ________.

a. sold by government agencies
b. created by banks
c. created by writers
d. marketed on the over-the-counter market

Futures Versus Forwards, p. 707

20.2 Which one of the following is an example of a currency futures exchange?

a. The Chicago Board of Trade
b. The New York Stock Exchange
c. The International Monetary Market
d. The Tokyo Stock Exchange

Exchange Trading, p. 707

20.3 Unlike forward contracts, the size of currency futures contracts are ________.

a. subject to the forces of supply and demand in the currency spot market
b. based on the months in which they expire
c. a function of the initial margin required at the open of the trade
d. a standardized amount that differs for each currency traded

Standardized Amounts, p. 708

20.4 Unlike forward contracts, the maturity dates in the futures market are ________.

a. limited to four dates during the year
b. based on the first business day of each month
c. unlimited since futures contracts may be terminated anytime
d. limited to only regular business days rather than calendar days

Fixed Maturities, p. 708

20.5 When a futures contract is purchased, ________.

a. no money changes hands
b. the only cash flow is at the maturity of the contract
c. the buyer must deposit a certain amount of cash into a margin account
d. the futures commission merchant marks up the price to cover his commission

Margins, p. 709

20.6 When the value of the futures contract margin account falls below the maintenance margin, ________.

a. no action is necessary by the investor
b. there is a margin call
c. there is a margin call at which point the account must be brought back up to the maintenance margin amount
d. no money changes hands again until the expiration date
Margins, p. 709

20.7 The ________ is the minimum amount that must be kept in the futures margin account to guard against severe volatility in the futures contract price.

a. initial margin
b. settle price
c. maintenance margin
d. open interest

Margins, p. 709

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