An Introduction to Derivative Securities 1st Edition by Robert A. Jarrow – Test Bank
ISBN-13: 978-0393912937 ISBN-10: 0393912930
CHAPTER 1: Derivatives and Risk Management
MULTIPLE CHOICE
- The following is NOT a feature of current derivatives markets:
| a. | there is a huge variety in the number and type of derivatives contracts that are traded |
| b. | the derivatives markets are now global and measured in trillions of dollars |
| c. | commodity derivatives have emerged as the most popular kind of derivatives traded in the new millennium |
| d. | colleges and universities now offer many kinds of derivative courses |
| e. | Wall Street firms hire graduate degree holders in finance and quantitative methods for designing and trading derivatives |
ANS: C DIF: Easy REF: 1.1 TOP: Introduction
MSC: Factual
- A derivative security:
| a. | is useful only for speculation |
| b. | is useful only for hedging |
| c. | is useful only for manipulating markets |
| d. | can be used for all of these purposes |
| e. | is useful for none of these purposes |
ANS: D DIF: Easy REF: 1.2 TOP: Financial Innovation
MSC: Factual
- Foreign exchange prices became volatile during the 1970s mainly because of:
| a. | an end of the policy of fixing interest rates by the US Federal Reserve Bank |
| b. | the demise of the Bretton Woods system of fixed exchange rates |
| c. | supply shocks of the 1970s |
| d. | technology that helped us overcome the vagaries of Mother Earth |
| e. | hedge funds manipulating exchange trades |
ANS: B DIF: Easy REF: 1.2 TOP: Financial Innovation
MSC: Factual
- Interest rates in the United States became volatile during the late 1970s mainly due to:
| a. | an end of the policy of fixing interest rates by the US Federal Reserve Bank |
| b. | the demise of the Bretton Woods system of fixed exchange rates |
| c. | technological changes that enabled banks to modify interest rates |
| d. | hedge funds manipulating interest rates |
ANS: A DIF: Easy REF: 1.2 TOP: Financial Innovation
MSC: Factual
- The International Monetary Market is:
| a. | an OTC market where money market instruments trade |
| b. | a part of the World Bank that lends funds to developing countries |
| c. | a division of the Chicago Mercantile Exchange created for trading foreign currency futures |
| d. | a London-based market for interbank lending |
| e. | None of these answers are correct. |
ANS: C DIF: Easy REF: 1.2 TOP: Financial Innovation
MSC: Factual
- In the United States, the Great Moderation refers to:
| a. | a 15-year-long period that began around 1900 during which the growth of real output fluctuated, inflation declined, stock market volatility was reduced, and business cycles were moderated |
| b. | the time period between 1920 and 1933 when sale, manufacture, and transportation of alcohol was prohibited |
| c. | a time period that began in 1955 and lasted for nearly a decade during which business cycle fluctuations declined and inflation was under control |
| d. | a time period that began after World War II and lasted for nearly a decade during the growth of real output fluctuated, inflation declined, stock market volatility was reduced, and business cycles were moderated |
| e. | a time period that began during the mid-1980s and lasted a little over two decades during which the growth of real output fluctuated, inflation declined, stock market volatility was reduced, and business cycles were moderated |
ANS: E DIF: Easy REF: 1.2 TOP: Financial Innovation
MSC: Factual
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