FINC 306 Certification Exam Questions and CORRECT Answers
DerivativeA financial instrument that has a value determined by the price of the underlying. An agreement between two parties Underlying assetsthe most common include stocks, bonds, commodities, currencies, interest rates and market indexes Types of DerivativesForwards, futures, options, swaps Use of derivativesrisk management, speculation, reduce transaction costs, regulatory arbitrage Measures of market size1. Market value: # units of claims x price of claims 2. Notional value: #units of claims x # of underlying assets/units x price of underlying assets 3. Trading volume: # units of claims (exchanged over a certain period) 4. Open interest= # units of claims (that have not been exercised which are help by market participants at the end of the day)
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