Questions on Derivatives
1. Can you think of some advantages of using derivatives?
2. The vast majority of OTC derivatives are on:
• foreign exchange
• equities
• interest rates
3. What are the differences between forwards and futures?
4. Do you think derivatives increase or decrease risk?
5. Why do you think total derivatives outstanding increased exponentially from 1998 to 2008, decreased from 2009-2011, but then increased again?
6. Which of the following are derivatives?
• FX forwards
• Oil futures
• Interest Rate Swaps
• FTSE100 index
• UK Gilts
• Apple (AAPL) options?
7. What has more counter-party risk – exchange traded products or over the counter trades (OTC)?
8. Which of the following users of derivatives would be classified as hedgers vs speculators?
• FARMER Wheat crop
• HSBC Bond Trader
• MERCEDES BENZ Corporate Treasurer
• HEDGE FUND MANAGER Global Macro
• HOVIS Bread makers from wheat
USER
MARKET
HEDGER
SPECULATOR
Farmer
Wheat
HSBC
Bonds
Mercedes Benz
FX
Hedge fund manager
Global Macro – Bonds, FX, Equities
Hovis Bread Company
Wheat for flour