NISM Series I Currency
Derivatives Mock Test DemoIFMC Institute
In JPYINR, INR is the base currency - True or False ?
Explanation: In JPYINR, JPY is the Base Currency and INR is the Quoted Currency. The first mentioned currency is always the Base currency.
In the currency derivative segment of a recognized exchange, pay-in and payout of the mark-to-market settlement are effected on___________.
Every derivative contract should have ____________.
Explanation: Every derivative contract should have an underlying be it Stocks, Commodities, Currencies etc. Without an underlying there there can be no derivative.
The interest rate of UK is lower than India. As per the concept of Interest Rate Parity the future currency price of GBP will be __________ to INR.
Explanation: India has an interest rate higher than UK, so as per the concept of Interest Rate Parity, the GBPINR Future price will always be at a premium to Spot prices. If the interst rate gap widens, so will the spot price-future price gap. For eg - price of future GBPINR pair is 72 when spot price is 70. It means that INR is at discount to GBP and GBP is at premium to INR.
The total number of outstanding contracts in the future market at any point of time is called the __________.
A trader buys two April USDINR contract which cost him Rs 104000. The RBI reference rate for final settlement is fixed at 52.30. How much profit / loss did he make ?
Explanation: USDINR contract lot is 1000. He has bought two lots for a cost of Rs 104000 So 104000 / 2 = 52000 and 52000 / 1000 = 52 Buying Price Settlement Price is 52.30. 52.30 - 52 = 0.30 profit x 2 lots x 1000 lot size = Rs 600 profit
The first ever financial future was Stock Derivative future - True or False ?
Explanation: The first ever financial future was Currency (FX) future.
Which currency is widely used as the 'Vehicle Currency' in foreign exchange transactions ?
A trader buys a USDINR call option at strike of 57.50 and pays a premium of INR 0.60. What is the break even point for this trade ?
Explanation: For a long Call Option : Strike Price plus the premium paid is the breakeven point 57.50 + 0.60 = 58.10
Mr. Shah is expecting a remittance of USD 10,000 after two months. To safeguard himself against currency fluctuations he should ____________.
Explanation: Mr. Shah has to send USD after two months, so to safegaurd against fluctuations, he will buy USD futures. The lot size for each USDINR future contract is USD 1000. So by buying 10 contracts he is hedgeing his future receipts of USD 10,000. The lot size for EURINR it is EUR 1000; GBPINR it is GBP 1000 and in case of JPYINR it is JPY 100,000.
The number of USDINR option contracts which can be made available for trading at a given time are _____ .
Explanation: Options contracts having the following expiries shall be available for trading on USDINR. On the expiry of a near month contract, new contracts shall be made available so that at any point in time there shall be at least four expiries available for trading. For eg : Sr. No. Expiry Date Maturity Date Remarks 1 26 NOV 2010 26 NOV 2010 Monthly Contract 2 29 DEC 2010 29 DEC 2010 Monthly Contract 3 27 JAN 2011 27 JAN 2011 Monthly Contract 4 29 MAR 2011 29 MAR 2011 Quarterly Contract
If a trader expects INR to depreciate against the USD, he will sell USDINR - True or False ?
Explanation: Eg - If USDINR is 55 and Rupee begins to depreciate, then USDINR will move up from 55 to ... 56 and so on. So if a trader is expecting INR to depreciate, he will buy USDINR at 55 and profit fom the upward move.
Unlike Equity markets, where there are daily price bands for various stocks, there are no daily price bands applicable for currency futures contracts - True or False ?
Explanation: There are no daily price bands applicable for currency futures contracts. However in order to prevent erroneous order entry by members, operating ranges will be kept at +/-3% of the base price for contracts with tenure upto 6 months and +/-5% for contracts with tenure greater than 6 months.
The participants in foreign exchange market are _____________.
What will be the Settlement Date for JPYINR currency future contracts for the month of September 2012 if the last working day ie. 30th September falls on a Monday ?
Explanation: Settlement Date is the Last working day of the month (subject to holiday calendars) at 12 noon. (Last trading day or Expiry day - 12 noon on the day that is two working days prior to the settlement date)
The main basic accounting heads to be maintained by any market participant for maintaining currency futures accounts are Initial margin - currency futures and Mark to market - currency futures - True or False ?
The one year interest rate in USD is 2 % and is 9 % in India. Assume the spot rate is 60 and the one year future price is 62.50. If the interest rate gap between US and India widens and other things remain the same, what will be the one year future price ?
As per the Foreign Exchange Management Act an 'AD Category 1' bank should have a minimum networth of Rs _______ to become a Trading and Clearing Member of currency futures segment at a recognised stock exchange.
Q 19. A textile exporter from India hedges its receivables using exchange traded currency options. It buys 100 lots of USDINR one month put of strike price 60 at a premium of 30 paise per contract. After a few days, the exporter decided to cancel the put option and at that time spot was 59.50 and the price quoted for one month option of strike 60 was 18/19 paise. How much Profit / Loss did he make in this transaction ?
Explanation: The main data is the buying and selling prices. He bought at 30 paise and sold at 18 paise. So net loss of 12 paise ( 30 -18 ) (-).12 X 100 lots x 1000 lot size = -12,000
As per the Foreign Exchange Management Act an 'AD Category 1' bank can have a minimum capital adequacy (CAR) ratio _____ % to become a Trading and Clearing Member of currency futures segment at a recognised stock exchange.
Brokers should promptly issue contract notes to his clients and clients of his sub brokers - True or False ?
The currency futures segment of the Exchange has a separate Governing Council on which the representation of Trading /Clearing Members of the currency futures segment does not exceed 50% - True or False ?
Explanation: The currency futures segment of the Exchange has a separate Governing Council on which the representation of Trading /Clearing Members of the currency futures segment does not exceed 25 %
Which of the following steps will help the situation where in the local currency of a country is depreciating ?
Explanation: One reason for the depreciation of a currency is the outflow of foreign capital / currency. So if the outflow can be reduced and inflow increased, the depreciation of the currency will get reduced. Therefore by allowing more Foreign Institutional Investors ( FII ) to invest more money will help increase inflows and reduce the local currency depreciation.
The one year interest rate in GBP is 1 % and is 9 % in India. Assume the spot rate is 70 and the one year future price is 73. If the interest rate gap between UK and India comes down and other things remain the same, what will be the one year future price ?
A call option of strike price 50 is available at premium of 0.75 when the spot price is 50.50. If the spot price increases the premium will decline.
Explanation: When the spot price increase, the Value / Premium of Call Option will always rise.
A person sells a USD Put option at strike of 60.50 and receives a premium of INR 0.40. What would be the breakeven point for the transaction?
Explanation: The breakeven point for a short put is the strike price of the option minus the premium. So 60.50 - 0.40 = 60.10
One month EURINR is quoting at 68.75/68.90 in the OTC market and futures for same maturity is quoting at 69.30/69.60. Which of the following describes possible arbitrage trade and possible arbitrage profit per EUR if the arbitrage trade is carried until maturity?
Explanation: Arbitrageurs make profits by simultaneously entering opposite side transactions in two or more markets ie. buy in one market at a lower price and sell in another at a higher price. Here, in the OTC Market the Bid Ask price is 68.75 / 68.90. So an arbitrageur will buy at 68.90. In Futures Market the Bid Ask price is 69.30 / 69.60. So the arbitrageur will sell at 69.30. Thus he will make an arbitrage profit of Rs 0.40 ( 69.30 - 68.90 )
Mr Raunak believes that there is a very strong bullish trend in USDINR. He also believes that there will be a decrease in volatility. So which option strategy is he most likely to use ?
Explanation: Buying a Call is the best option as he is anticipating a strong bullish run in USDINR. Decrease in volatility will be an added advantage as he will get the call cheaper.
Which of the following best describes the SEBI prescribed open position limit for GBPINR contracts for Stock Brokers (bank & non-bank) and Category I & II FPIs?
Explanation: V.IMP Note - Please memorise the open position limits which have been prescribed by SEBI for different currency pairs and different market participants from the NISM Nov 2014 book
What is done when a client defaults in making the Mark to Market margin payments ?
Explanation: When a client defaults in making payments in respect of a daily settlement mark to market margins, the contract is closed out. The amount not paid by the client is adjusted against the initial margin.
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