Derivatives Level 3 (IOC) – Quiz 01

Last Updated: June 2024

Table of Contents

CISI – Derivatives Level 3 (IOC) Quiz 01 is completed –
understand the basic concepts and fundamental characteristics of: • forward and futures contracts • contracts for differences
understand the basic concepts and fundamental characteristics of options contracts, including: • basic puts and calls • options on cash and derivative products • American, European, Asian • Exotics
understand the basic concepts and fundamental characteristics of swaps
understand the risks and rewards associated with derivatives: • rewards • counterparty risk • market risk • liquidity risk • operational risk
understand the significance of gearing to derivatives: • how trading on margin facilitates gearing • effect on derivative positions • reward versus outlay • reward versus risk
understand the principles and differences between the two major measures of exchange-traded liquidity (open interest and volume)
understand the main features and differences of OTC traded products in contrast to exchange-traded products: • how an OTC traded product is traded • standard versus bespoke OTC contracts • set maturity or expiry dates versus bespoke OTC contracts • margin requirements versus collateral • counterparty risk • liquidity • market transparency versus confidential transactions
understand the trading mechanisms by which OTC and exchange traded markets meet: • EFPs (Exchange for Physical)
understand how to interpret basic options diagrams (long call, long put, short call, short put)
know the basic characteristics of Treasury Bills: • term • how and when issued • issued / redemption • promissory note

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