Derivatives Level 3 (Capital Markets Programme) – Quiz 08

Last Updated: June 2024

Table of Contents

CISI – Derivatives Level 3 (Capital Markets Programme) Quiz 08 is completed –
understand the importance of hedging ratios in cheapest to deliver bonds (CTDs): • price factors • highest implied repo rate • number of contracts to hedge an exposure to the CTD bond • duration based hedge ratios for non-CTD bonds
understand hedge ratio calculation for other short-term interest rate futures: • basis point value • number of contracts to hedge an interest rate exposure
understand hedge ratio calculation for equity futures: • stock and portfolio beta • number of contracts to hedge an equity exposure
understand basis, basis trading and basis risk: • problems caused by changes in basis • how changes in basis can be used to advantage by an investor
understand the application and effects of delta hedging and be able to establish an investor’s net long / short position

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