An Introduction to Derivatives and Risk
Management – 10th Edition
ST
TEST BANK
UV
IA
_A
Don M. Chance
PP
RO
Comprehensive Test Bank for Instructors
and Students
VE
D?
© Don M. Chance & coauthors
??
All rights reserved. Reproduction or distribution without permission is prohibited.
Created by MedConnoisseur ©2025/2026
, TABLE OF CONTENTS
An Introduction to Derivatives and Risk
ST
Management – 10th Edition
Don M. Chance & coauthors
UV
Part I: Options
1. Introduction
IA
2. Derivatives Markets
3. Principles of Options Pricing
4. Option Pricing Models: The Binomial Model
_A
5. Option Pricing Models: The Black-Scholes-Merton Model
6. Basic Option Strategies
7. Advanced Option Strategies
PP
Part II: Forwards, Futures, and Swaps
8. Principles of Pricing Forwards, Futures, and Options on Futures
9. Futures Arbitrage Strategies
10. Hedging
RO
11. Swaps
Part III: Advanced Topics
12. Interest Rate Forwards and Options
VE
13. Advanced Derivatives and Strategies
14. Financial Risk Management Techniques and Applications
15. Managing Risk
D?
??
Created by MedConnoisseur ©2025/2026
, CHAPTER 1: INTRODUCTION
MULTIPLE CHOICE TEST QUESTIONS
ST
1. The market value of the derivatives contracts worldwide totals
a. less than a trillion dollars
b. in the hundreds of trillion dollars
c. over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
UV
e. none of the above
2. Cash markets are also known as
a. speculative markets
b. spot markets
c. derivative markets
d. dollar markets
IA
e. none of the above
3. A call option gives the holder
a. the right to buy something
b. the right to sell something
_A
c. the obligation to buy something
d. the obligation to sell something
e. none of the above
4. Which of the following instruments are contracts but are not securities
a. stocks
PP
b. options
c. swaps
d. a and b
e. b and c
5. The positive relationship between risk and return is called
RO
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
VE
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
D?
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.
, e. all of the above
8. A forward contract has which of the following characteristics?
a. has a buyer and a seller
ST
b. trades on an organized exchange
c. has a daily settlement
d. gives the right but not the obligation to buy
e. all of the above
UV
9. Options on futures are also known as
a. spot options
b. commodity options
c. exchange options
d. security options
e. none of the above
IA
10. A market in which the price equals the true economic value
a. is risk-free
b. has high expected returns
c. is organized
d. is efficient
_A
e. all of the above
11. Which of the following trade on organized exchanges?
a. caps
b. forwards
c. options
PP
d. swaps
e. none of the above
12. Which of the following markets is/are said to provide price discovery?
a. futures
b. forwards
RO
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
VE
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
D?
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.
Management – 10th Edition
ST
TEST BANK
UV
IA
_A
Don M. Chance
PP
RO
Comprehensive Test Bank for Instructors
and Students
VE
D?
© Don M. Chance & coauthors
??
All rights reserved. Reproduction or distribution without permission is prohibited.
Created by MedConnoisseur ©2025/2026
, TABLE OF CONTENTS
An Introduction to Derivatives and Risk
ST
Management – 10th Edition
Don M. Chance & coauthors
UV
Part I: Options
1. Introduction
IA
2. Derivatives Markets
3. Principles of Options Pricing
4. Option Pricing Models: The Binomial Model
_A
5. Option Pricing Models: The Black-Scholes-Merton Model
6. Basic Option Strategies
7. Advanced Option Strategies
PP
Part II: Forwards, Futures, and Swaps
8. Principles of Pricing Forwards, Futures, and Options on Futures
9. Futures Arbitrage Strategies
10. Hedging
RO
11. Swaps
Part III: Advanced Topics
12. Interest Rate Forwards and Options
VE
13. Advanced Derivatives and Strategies
14. Financial Risk Management Techniques and Applications
15. Managing Risk
D?
??
Created by MedConnoisseur ©2025/2026
, CHAPTER 1: INTRODUCTION
MULTIPLE CHOICE TEST QUESTIONS
ST
1. The market value of the derivatives contracts worldwide totals
a. less than a trillion dollars
b. in the hundreds of trillion dollars
c. over a trillion dollars but less than a hundred trillion
d. over quadrillion dollars
UV
e. none of the above
2. Cash markets are also known as
a. speculative markets
b. spot markets
c. derivative markets
d. dollar markets
IA
e. none of the above
3. A call option gives the holder
a. the right to buy something
b. the right to sell something
_A
c. the obligation to buy something
d. the obligation to sell something
e. none of the above
4. Which of the following instruments are contracts but are not securities
a. stocks
PP
b. options
c. swaps
d. a and b
e. b and c
5. The positive relationship between risk and return is called
RO
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
VE
call is
a. a gamble
b. a speculative position
c. a hedge
d. a risk-free transaction
e. none of the above
D?
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.
, e. all of the above
8. A forward contract has which of the following characteristics?
a. has a buyer and a seller
ST
b. trades on an organized exchange
c. has a daily settlement
d. gives the right but not the obligation to buy
e. all of the above
UV
9. Options on futures are also known as
a. spot options
b. commodity options
c. exchange options
d. security options
e. none of the above
IA
10. A market in which the price equals the true economic value
a. is risk-free
b. has high expected returns
c. is organized
d. is efficient
_A
e. all of the above
11. Which of the following trade on organized exchanges?
a. caps
b. forwards
c. options
PP
d. swaps
e. none of the above
12. Which of the following markets is/are said to provide price discovery?
a. futures
b. forwards
RO
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
VE
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
D?
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.
