ST
An Introduction to Derivatives and Risk
UV Management – 10th Edition
IA_
TEST BANK
AP
PR
O VE
Don M. Chance
D?
Comprehensive Test Bank for Instructors
and Students
© Don M. Chance & coauthors
All rights reserved. Reproduction or distribution without permission is prohibited.
Created by MedConnoisseur ©2025/2026
,ST
TABLE OF CONTENTS
UV
An Introduction to Derivatives and Risk
Management – 10th Edition
IA_
Don M. Chance & coauthors
Part I: Options
AP
1. Introduction PR
2. Derivatives Markets
3. Principles of Options Pricing
4. Option Pricing Models: The Binomial Model
O
5. Option Pricing Models: The Black-Scholes-Merton Model
6. Basic Option Strategies VE
7. Advanced Option Strategies
Part II: Forwards, Futures, and Swaps D?
8. Principles of Pricing Forwards, Futures, and Options on Futures
9. Futures Arbitrage Strategies
10. Hedging
11. Swaps
Part III: Advanced Topics
12. Interest Rate Forwards and Options
13. Advanced Derivatives and Strategies
14. Financial Risk Management Techniques and Applications
15. Managing Risk
Created by MedConnoisseur ©2025/2026
,ST
MULTIPLE CHOICE TEST QUESTIONS
CHAPTER 1: INTRODUCTION
1. UV
The market value of the derivatives contracts worldwide totals
a.
b.
c.
less than a trillion dollars
in the hundreds of trillion dollars
over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
2.
IA_
e. none of the above
Cash markets are also known as
a. speculative markets
b. spot markets
c.
d.
e.
derivative markets
dollar markets
none of the above
AP
3. A call option gives the holder
a.
b.
c.
d.
the right to buy something
the right to sell something
the obligation to buy something
the obligation to sell something
PR
e. none of the above
4.
a.
b.
stocks
options
OV
Which of the following instruments are contracts but are not securities
c. swaps
5.
d.
e.
a and b
b and c
The positive relationship between risk and return is called
ED
a. expected return ?
b. market efficiency
c. the law of one price
d. arbitrage
e. none of the above
6. A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
7. Which of the following are advantages of derivatives?
a. lower transaction costs than securities and commodities
b. reveal information about expected prices and volatility
c. help control risk
d. make spot prices stay closer to their true values
10th Edition: Chapter 1 151 Test Bank
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
, ST
8.
e. all of the above
A forward contract has which of the following characteristics?
a. has a buyer and a seller
UV
b.
c.
d.
e.
trades on an organized exchange
has a daily settlement
gives the right but not the obligation to buy
all of the above
9.
IA_
Options on futures are also known as
a.
b.
c.
spot options
commodity options
exchange options
d. security options
10.
e. none of the above AP
A market in which the price equals the true economic value
a. is risk-free
b. has high expected returns
c.
d.
e.
is organized
is efficient
all of the above
PR
11. Which of the following trade on organized exchanges?
a.
b.
c.
d.
caps
forwards
options
swaps
OV
e. none of the above
12. Which of the following markets is/are said to provide price discovery?
a.
b.
futures
forwards
ED
c. options ?
d. a and b
e. b and c
13. Investors who do not consider risk in their decisions are said to be
a. speculating
b. short selling
c. risk neutral
d. traders
e. none of the above
14. Which of the following statements is not true about the law of one price
a. investors prefer more wealth to less
b. investments that offer the same return in all states must pay the risk-free rate
c. if two investment opportunities offer equivalent outcomes, they must have the same price
d. investors are risk neutral
e. none of the above
15. Which of the following contracts obligates a buyer to buy or sell something at a later date?
10th Edition: Chapter 1 152 Test Bank
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
An Introduction to Derivatives and Risk
UV Management – 10th Edition
IA_
TEST BANK
AP
PR
O VE
Don M. Chance
D?
Comprehensive Test Bank for Instructors
and Students
© Don M. Chance & coauthors
All rights reserved. Reproduction or distribution without permission is prohibited.
Created by MedConnoisseur ©2025/2026
,ST
TABLE OF CONTENTS
UV
An Introduction to Derivatives and Risk
Management – 10th Edition
IA_
Don M. Chance & coauthors
Part I: Options
AP
1. Introduction PR
2. Derivatives Markets
3. Principles of Options Pricing
4. Option Pricing Models: The Binomial Model
O
5. Option Pricing Models: The Black-Scholes-Merton Model
6. Basic Option Strategies VE
7. Advanced Option Strategies
Part II: Forwards, Futures, and Swaps D?
8. Principles of Pricing Forwards, Futures, and Options on Futures
9. Futures Arbitrage Strategies
10. Hedging
11. Swaps
Part III: Advanced Topics
12. Interest Rate Forwards and Options
13. Advanced Derivatives and Strategies
14. Financial Risk Management Techniques and Applications
15. Managing Risk
Created by MedConnoisseur ©2025/2026
,ST
MULTIPLE CHOICE TEST QUESTIONS
CHAPTER 1: INTRODUCTION
1. UV
The market value of the derivatives contracts worldwide totals
a.
b.
c.
less than a trillion dollars
in the hundreds of trillion dollars
over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
2.
IA_
e. none of the above
Cash markets are also known as
a. speculative markets
b. spot markets
c.
d.
e.
derivative markets
dollar markets
none of the above
AP
3. A call option gives the holder
a.
b.
c.
d.
the right to buy something
the right to sell something
the obligation to buy something
the obligation to sell something
PR
e. none of the above
4.
a.
b.
stocks
options
OV
Which of the following instruments are contracts but are not securities
c. swaps
5.
d.
e.
a and b
b and c
The positive relationship between risk and return is called
ED
a. expected return ?
b. market efficiency
c. the law of one price
d. arbitrage
e. none of the above
6. A transaction in which an investor holds a position in the spot market and sells a futures contract or writes a
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
7. Which of the following are advantages of derivatives?
a. lower transaction costs than securities and commodities
b. reveal information about expected prices and volatility
c. help control risk
d. make spot prices stay closer to their true values
10th Edition: Chapter 1 151 Test Bank
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
, ST
8.
e. all of the above
A forward contract has which of the following characteristics?
a. has a buyer and a seller
UV
b.
c.
d.
e.
trades on an organized exchange
has a daily settlement
gives the right but not the obligation to buy
all of the above
9.
IA_
Options on futures are also known as
a.
b.
c.
spot options
commodity options
exchange options
d. security options
10.
e. none of the above AP
A market in which the price equals the true economic value
a. is risk-free
b. has high expected returns
c.
d.
e.
is organized
is efficient
all of the above
PR
11. Which of the following trade on organized exchanges?
a.
b.
c.
d.
caps
forwards
options
swaps
OV
e. none of the above
12. Which of the following markets is/are said to provide price discovery?
a.
b.
futures
forwards
ED
c. options ?
d. a and b
e. b and c
13. Investors who do not consider risk in their decisions are said to be
a. speculating
b. short selling
c. risk neutral
d. traders
e. none of the above
14. Which of the following statements is not true about the law of one price
a. investors prefer more wealth to less
b. investments that offer the same return in all states must pay the risk-free rate
c. if two investment opportunities offer equivalent outcomes, they must have the same price
d. investors are risk neutral
e. none of the above
15. Which of the following contracts obligates a buyer to buy or sell something at a later date?
10th Edition: Chapter 1 152 Test Bank
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole
or in part.
