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A. promote pricing efficiency and produce riskless profits. 
B. result in the correction of mispriced assets. 
C. insure that risk-adjusted expected returns are equal.

A. S - X ＞ 0, a call option is in-the-money. 
B. S -X = 0, a call option is at-the-money. 
C. S - X ＞ 0, a put option is in-the-money.

A. are custom instruments and involve counterparty risk. 
B. are highly regulated. 
C. have no active secondary market.

A. the short may be required to sell the asset. 
B. the long must sell the asset or make a cash payment. 
C. at least one party must make a cash payment to the other.

A. make/receive a payment to/from the original counterparty. 
B. sell the swap. 
C. enter into an offsetting swap.

A. reduce transactions costs and obtain cheaper financing. 
B. exploit market inefficiencies. 
C. maintain privacy.

A. There is no risk. 
B. There are no commissions. 
C. There is no initial investment and there is a guaranteed profit.

A. are unique contracts. 
B. are private contracts. 
C. require no up front cash and are default risk free.

A. a single price is determined by supply and demand. 
B. the seller receives the bid price; the buyer pays the ask price. 
C. the purchase of the asset is at a negotiated price.

A. series of forward contracts. 
B. derivative contract that has not gained widespread popularity. 
C. contract that is binding on only one of the parties to the transaction.

A. is priced using the future interest rate on a foreign currency. 
B. requires a payment at settlement based on London Inter-bank Offered Rate. 
C. can be a deliverable contract.

A. Pay USD fixed, receive U. S. LIBOR. 
B. Receive AUD fixed, pay NZD floating. 
C. Receive U. S. fixed, pay U.S. commercial paper.

A. a short position in the underlying future. 
B. an option to purchase the underlying future. 
C. a long position in the underlying future and a cash payment.

A. the bond dollar-price plus accrued interest as of the settlement date. 
B. a discount to the face value. 
C. a yield to maturity at the settlement date.

A. above the current price of a 90-day T-bill. 
B. above the current price of a 180-day T-bill. 
C. either above or below the current price of a 180-day T-bill.

A. Swaps typically have zero value at initiation. 
B. Swaps can have significant default risk. 
C. Parties to swap contracts are often individual speculators.

A. is priced on a discount basis. 
B. is a certificate of deposit denominated in Euros. 
C. may be issued by a Japanese bank.

A. reduce the credit risk involved with the contract. 
B. increase the liquidity of the contract. 
C. maintain the firm's privacy.

A. Long put. 
B. Long stock, long put (portfolio insurance). 
C. Long stock, short call (covered call).

A. makes a cash payment to the long at settlement. 
B. receives a payment at contract initiation. 
C. is obligated to deliver the specified asset.

A. common stock. 
B. common stock plus accrued dividends. 
C. cash.

A. entering an offsetting swap with the original counterparty. 
B. selling a swaption. 
C. making a cash payment to the original counterparty.

A. is a contractual promise. 
B. involves an action in the future. 
C. is not legally binding and can involve a stock index.

A. are illiquid and have secondary markets. 
B. are standardized contracts. 
C. often trade in a physical location.

A. derivatives are easy to understand and use. 
B. derivatives have relatively low transaction costs. 
C. the pricing of derivatives is relatively straightforward.

A. a London interbank lending rate. 
B. the rate on U. S. dollar deposits in continental Europe. 
C. published by the European Central Bank.

A. is bounded by S-X/(1 +RFR)<SUP>T</SUP> 
B. will sell for its intrinsic value. 
C. will never sell for less than its intrinsic value.

A. has a payoff based on another asset. 
B. always increase risk. 
C. has no expiration date.

A. can not be a bank. 
B. may enter into a contract with another dealer. 
C. gets a small payment for each contract at initiation.

A. comes some period after option expiration. 
B. is periodic, typically every 90 days. 
C. is greater than the "strike" rate.

A. are standardized contracts. 
B. cover a single payment. 
C. do not require a payment from either party at initiation.

A. Yes, X should borrow dollars, Z should borrow yen, and the companies should enter a currency swap. 
B. No, Bout companies do not have relative advantages that can be exploited. 
C. Yes, X should borrow yen, Z should borrow dollars, and the companies should enter a currency swap.

A. An oil refiner who has a large inventory of unleaded gasoline that will not be sold for 3 months takes a SHORT position in unleaded gasoline futures contracts. 
B. An orange grower will harvest oranges and process them into orange juice at the end of next month. He sells (takes a SHORT position in) orange juice futures today. 
C. All of the above describe hedgers.

A．Dealer
B．Quotes
C．60-Day
D．LIBOR=0.0450
E．90-Day
F．LIBOR=0.0440
G．180-Day
H．LIBOR=0.1420

A. Equity forwards may be settled in cash. 
B. Dividends are never included in index forwards. 
C. A short position in equity forward could not hedge the risk of a purchase of that equity in the future.

A. A future requires the contract purchaser to receive delivery of the good at a specified time. 
B. A predetermined price to be paid for a good is a necessary requirement in the terms of a forward contract. 
C. The primary difference between forwards and futures is that only futures are considered financial derivatives.

A. they are based on a fixed income security and can hedge interest rate risk. 
B. they are based on a specific interest rate rather than a bond. 
C. call option values move in the same direction as interest rates.

A. Equity forwards may be settled in cash. 
B. Dividends are never included in index forwards. 
C. A short position in equity forward could not hedge the risk of a purchase of that equity in the future.

A. entering into an offsetting contract with the original counterparty or a second (different) counterparty. 
B. exercising the early delivery option. 
C. making a cash payment or accepting a cash payment by agreement with the original counterparty.

A. Company Z because it can borrow francs at a lower interest rate. 
B. Company Z because it can borrow marks at a lower interest rate. 
C. Company W because it can borrow francs at a lower interest rate.

A. The June $55.00 call is an in-the-money option. 
B. The June $50. O0 call is an at-the-money option. 
C. The intrinsic value of the June $45.00 call is $5.00.

A. Exercise a swaption. 
B. Make an agreed upon payment to the counterparty. 
C. Enter into an offsetting forward contract with a party not involved in the original forward contract.

A. There are no payments in a currency swap except at initiation and maturity. 
B. The notional principal is not swapped at initiation. 
C. The payments are denominated in two different currencies.

A. European option contract is not adjusted for stock splits and stock dividends and does not conform to the Black-Scholes model and is often mispriced. 
B. American option can be exercised from date of purchase until expiration, but the European option can be exercised only at expiration. 
C. American options are traded on U. S. exchanges, which offer much more volume and liquidity.

A. variable to a currency swap counterparty and receive fixed. 
B. variable to an interest rate swap counterparty and receive fixed. 
C. fixed to an interest rate swap counterparty and receive variable.

A. fixed to a currency swap counterparty and receive variable. 
B. variable to an interest rate swap counterparty and receive fixed. 
C. variable to a currency swap counterparty and receive fixed.

A. Losses are theoretically unlimited. 
B. Profits are theoretically unlimited. 
C. Losses are limited to the initial premium the seller receives.

A. Unlike other swaps, in an equity swap the one-quarter-ahead payment is not known at the end of the previous quarter. 
B. The equity-return payer will receive the fixed-rate minus the equity return. 
C. The fixed-rate receiver will never get more than the fixed rate.

A. the amount of the underlying asset covered by the contract. 
B. a measure of the actual payments made and received in the contract. 
C. being, conceptually and in aggregate, the best available measure of the size of the market.

A. also known as delivery. 
B. also known as an exchange of physicals. 
C. the most common way to close a futures position.

A. all the participants in the market know exactly what is being offered for sale, and they know the terms of the transactions. 
B. it guarantees that all of the traders in the futures market will honor their obligations and that futures contracts trade in a smoothly functioning market. 
C. it provides a safeguard whereby traders are required to realize any losses in cash on the day they occur.

A. allows traders to reverse their position without having to contact the other side of the position. 
B. guarantees the physical delivery of the underlying asset to the buyer of futures contracts. 
C. splits each trade and acts as a buyer to futures sellers and as a seller to futures buyers.

A. Buy a put with a strike price of $37 and a premium of $2. 
B. Buy a covered call with a strike price of $37 and a premium of $2.
C. Buy an uncovered call with a strike price of $37 and a premium of $2.

A. Few futures positions are settled by delivery of cash or assets. 
B. Except for exchange for physicals (EFP) transactions, futures contracts must be closed on the exchange floor. 
C. Closing a position through delivery refers exclusively to the physical delivery of goods.

A. $75, and point Y represents a dollar value of $15. 
B. $70, and point Y represents a dollar value of $15. 
C. $80, and point Y represents a dollar value of $15.

A. is not exchanged by the counterparties. 
B. is determined by the counterparties. 
C. is used to calculate the fixed rate interest payment ; the swap’s market value is used to calculate the floating rate payment.

A. an average of the trade prices during the ’ closing period’ 
B. the price of the last trade of a futures contract at the end of the trading day. 
C. the price at which all trades over a certain period are executed.

A. Dealers make the majority of their profits by anticipating price moves in the underlying asset. 
B. Dealers will enter into forward contracts with other dealers. 
C. End users of forwards most often have a business exposure to price risk from the asset covered by the contract.

A. fixed interest rate and the counterparty pays a floating rate in a different currency. 
B. fixed interest rate and the counterparty pays a fixed rate, both in the same currency.
C. fixed interest rate and the counterparty pays a floating rate, both in the same currency.

A. Forward contracts require that both parties to the transaction have a high degree of creditworthiness. 
B. Forward contracts are marked to market daily. 
C. Futures contracts have more default risk than forward contracts.

A. only applies to the long, and is the probability that the short can not acquire the asset for delivery. 
B. is the risk to either party that the other party will not fulfill their contractual obligation. 
C. is lessened by the mark-to-market feature found in a typical forward contract.

A. the longer-term option must be worth more than the shorter-term option. 
B. the longer-term option must be worth less than the shorter-term option. 
C. the longer-term option must be worth at least as much as the shorter-term option.

A. the value of the call is $100. 
B. the value of the call is unknown. 
C. the value of the call is unlimited, in principle.

A. Futures contracts are easier to offset than forward contracts. 
B. Forward contracts are generally more liquid than futures contracts. 
C. Forward contracts are easier to tailor to specific needs than futures contracts.

A. Forward contract dealers are often banks. 
B. Dealers are compensated through up-front payments by the parties to forward contracts. 
C. Dealers offer long and short forward contracts at different prices.

A. Purchasing call options on the S&P 500. 
B. Writing put options on the S&P 500. 
C. Purchasing put options on the Standard and Poor’s 500 Index (S&P 500).

A. reduce the exposure from the mismatch between floating rate assets and fixed rate liabilities. 
B. create arbitrage profits by exploiting market inefficiencies. 
C. allow more flexibility in packaging cash flows.

A. Put option with an exercise price of $85. 
B. Put option with an exercise price of $70. 
C. Call option with an exercise price of $75.

A．<TABLE border=0 cellSpacing=0 cellPadding=0 width="90%"> <TBODY> <TR> <TD vAlign=top>A. $0. </TD></TR></TBODY></TABLE>
B．<TABLE border=0 cellSpacing=0 cellPadding=0 width="90%"> <TBODY> <TR> <TD vAlign=top>B. $100. </TD></TR></TBODY></TABLE>
C．<TABLE border=0 cellSpacing=0 cellPadding=0 width="90%"> <TBODY> <TR> <TD vAlign=top>C. $400.</TD></TR></TBODY></TABLE>

A. Intercon Bakery has a contract with several hotel chains to supply a variety of bread products at a set contract price. To protect against their cost of wheat increasing they periodically purchase wheat futures. 
B. A trader who purchases commodity futures but closes out his position prior to the end of the trading day. 
C. A farmer with corn acreage who short sells corn futures.

A. Delivery is also known as exchange for physicals (EFP). 
B. Depending on the wording of the contract, a trader may close a contract by either delivering the goods to a designated location or by making a cash settlement of any gains or losses. 
C. Although the popularity of physical delivery has decreased over time, delivery by cash settlement remains the most popular method of closing a futures position.

A. purchased the right to decide whether to sell 100 shares of General Motor’s stock and receive $181 during the specified time period (the expiration date in November) 
B. purchased the right to decide whether to purchase 100 shares Of General Motor’s stock and receive $181 during the specified time period (the expiration date in November) 
C. none of the above

A. derivatives have too much default risk. 
B. markets for derivatives seldom function efficiently like a stock exchange. 
C. they are complex instruments and sometimes hard to understand.

A. it provides firms that face financial risks with a flexible way to manage that risk. 
B. it provides firms that face financial risks with a fixed way to manage that risk. 
C. it gives you an ability to swap amongst a diverse range of products.

A. Speculators trade to reduce some preexisting risk exposure. 
B. If a trader’s account falls below the maintenance margin level they have three days to bring it back up to the maintenance margin level. 
C. Open interest is the number of futures contracts for which delivery is currently obligated.

A. must consider the creditworthiness of the parties making the deal when determining the rate. 
B. requires the long to pay cash to the short if the rate specified in the contract at expiration is below the current floating rate. 
C. can sometimes be viewed as the right to borrow money at below-market rates.

A. The notional principal amounts, adjusted for exchange rate changes, are exchanged at the termination of the swap. 
B. One party makes certain payments in Euros and one party makes certain payments in British pounds. 
C. The periodic payments are not netted, both payments are always made.

A. Rates are quoted as an add-on yield and are based on a 360-day year. 
B. Sometimes the best rates are available in New York City. 
C. They are available in Switzerland.

A. Hedgers trade to reduce some preexisting risk exposure. 
B. The clearinghouse guarantees that traders in the futures marker will honor their obligations. 
C. If an account rises to or exceeds the maintenance margin, then the trader must deposit variation margin.

A. increases in value against the U. S. dollar and the risk that interest rates decrease in Japan. 
B. decreases in value against the U. S. dollar and the risk that interest rates increase in Japan. 
C. increases in value against the U. S. dollar and the risk that interest rates increase in Japan.

A. The buyer of a forward contract has agreed to deliver the underlying asset at a specific price and date in the future whereas the seller has agreed to accept delivery of the underlying at the same agreed upon price and date. 
B. When prices increase, the buyer of a forward contract gains and the seller of a forward contract loses. 
C. The buyer of a forward contract gains when prices decrease, and the seller of a forward contract loses when prices increase.

A. a European put is less than the maximum value of an American put. 
B. an American call is less than the maximum value of a European call. 
C. a European put is equal to the maximum value of an American put.

A. Hedging can allow a business to guard against a price increase in a commodity without sacrificing profit if the commodity price decreases. 
B. Hedgers guard against market price changes that would cause a reduction in their operating profit. 
C. A speculator would use futures to take a short position in a commodity if its price is expected to increase.

A. adding the future value of the cash flows to S. 
B. adding the future value of the cash flows to X. 
C. subtracting the present value of the cash flows from S.

A. The concept of rationally priced financial instruments preventing arbitrage opportunities is the basis behind the no-arbitrage principle. 
B. Momentary deviations from market efficiency can create an arbitrage opportunity. 
C. Market efficiency refers to the low cost of trading derivatives because of the lower expense to traders.

A. The long position in an interest rate call option receives cash at expiration equal to Max[0, (reference rate-strike rate) ] × notional principal amount. 
B. The payoff on a stock index option is the difference between the index level at expiration and the exercise price. 
C. Payoffs on futures options can be determined without knowing the spot price of the underlying commodity.

A. increase market efficiency through the use of arbitrage. 
B. narrow the amount of trading opportunities to a more manageable range. 
C. engage in high risk speculation.

A. They are standardized agreements, similar to futures. 
B. Interest rate and currency are common types of swaps. 
C. They allow for the exchange of different sets of future cash flows.

A. Party A must make a payment of $10000. 
B. The payments net to zero and no payment is made. 
C. Party A must make a payment of $7500.

A. A portfolio of two securities that will produce a certain return that is greater than the riskfree rate of interest. 
B. A stock with the same price as another has a higher rate of return. 
C. A stock with the same price as another has a higher expected rate of return.

A. receive net payments of $42500. 
B. receive net payments of $14167. 
C. pay the dealer net payments of $14167.

A. if Grey exercises, he will have gained a total of $4.75. 
B. the intrinsic put value is $0 and the put is at-the-money. 
C. the intrinsic call value is $1.

A. the market with financial derivatives allows traders to more exactly shape the risk return characteristics of their portfolios. 
B. it is a market in which the owner of an option has the right to purchase the underlying good at a specific price, and this right lasts until a specific date. 
C. it is a market in which any and all identifiable payoffs can be obtained by trading the securities available in the market.

A.  Party A pays:  A. $87500 each year to Party B. 
B. $90000 each year to Party B. 
C. $2500 each year to Party B.

A. buying a series of interest-rate calls and selling a series of interest-rate puts. 
B. buying a series of interest-rate puts and selling a series of interest rate calls. 
C. buying a series of interest-rate puts and calls.

A. it is often possible to earn abnormal returns. 
B. the law of one price holds only in the academic literature. 
C. arbitrage opportunities rarely exist and are quickly eliminated.

A. long call where the breakeven is $53.50. 
B. long call where the breakeven is $46.50. 
C. short put where the breakeven is $53.50.

A. present value of, the market rate minus the exercise rate, adjusted for the period of the rate, times the principal amount. 
B. market rate minus the exercise rate, adjusted for the period of the rate, times the principal amount. 
C. present value of, the exercise rate minus the market rate, adjusted for the period of the rate, times the principal amount.

A. she is $14 better off with the covered call than she would be with the stock alone. 
B. she is $4 worse off with the covered call than she would be with the stock alone. 
C. she is $4 better off with the covered call than she would be with the stock alone.

A. The long is obligated to purchase the asset. 
B. The short is obligated to deliver the asset. 
C. Equilibrium futures price is known only at the end of the trading day.

A. one contract of volume. 
B. one contract of open interest. 
C. both A and B.

A. expects the price of the underlying stock to increase above the strike price and a put Writer expects the price of the underlying stock to decrease below the strike price. 
B. and a put writer both expect the price of the underlying stock to decrease below the strike price. 
C. expects the price of the underlying stock to decrease below the strike price and a put writer expects the price of the underlying stock to increase above the strike price.

A. A pays B $0.6 million. 
B. A pays B $6.6 million and B pays A $6 million. 
C. A pays B $13.2 million and B pays A $12 million.

A. increase market efficiency through the use of arbitrage. 
B. hedge positions in other assets and engage in high risk speculation. 
C. narrow the amount of trading opportunities to a more manageable range.

A. protects against loss at any stock price below the strike price of the put. 
B. has limited profit potential when the stock price rises. 
C. returns any increase in the stock’s value, dollar for dollar, less the cost of the put.

A. There is no way to terminate a forward contract early. 
B. A party who enters into an offsetting contract to terminate has no risk. 
C. Early termination through an offsetting transaction with the original counterparty eliminates default risk.

A. either the long or the short in the forward contract will make a cash payment at contract expiration and the asset is not delivered. 
B. at settlement, the long purchases the asset from the short for cash. 
C. at contract expiration, the long can buy the asset from the short or pay the difference between the market price of the asset and the contract price.

A. Because the American and European options have identical terms and are written against the same common stock, they will have identical option premiums. 
B. The greater flexibility allowed in exercising the American option will normally result in a higher market value relative to an otherwise identical European option. 
C. The American option will have a higher option premium, because the American security markets are larger than the European markets.

A. out of the money, and the time value is the market value minus the intrinsic value. 
B. in the money, and the time value is the intrinsic value minus the market value. 
C. in the money, and the time value is the market value minus the intrinsic value.

A. all its obligations to deliver are matched to other investors’ obligations to make delivery. 
B. it is highly capitalized and backed by large credit lines. 
C. of both A and B.

A. closed her futures position by offset. 
B. initiated a new LONG futures position in addition to her existing SHORT position. 
C. initiated an exchange-for-physicals (EFP).

A. Most currency swaps are done to exploit market inefficiencies. 
B. Notional principal is exchanged at the termination of the swap and the initiation of the swap. 
C. The periodic interest payments are exchanged in full each period.

A. US $5.5m and the English bank pays ￡ 5.36m. 
B. US $6m and the English bank pays ￡ 5.36m. 
C. ￡ 5.36m and the English bank pays US $5.5m.

A. when the trader transacts in the futures market to bring his or her net position in particular futures contract back to zero. 
B. when two traders agree to a simultaneous exchange of a cash commodity and futures contracts based on that cash commodity. 
C. through the physical delivery of a particular good or by cash settlement.

A. In a currency swap, the notional principal is actually swapped twice, once at the beginning of the swap and again at the termination of the swap. 
B. The time frame of a swap is called its tenor.
C. In a currency swap, only net interest payments are made.

A. The price of the option is less volatile than the price of the underlying stock. 
B. Option prices are generally higher the longer the time till the option expires. 
C. For put options, the higher the strike price relative to the stock’s underlying price, the more the put is worth.

A. A put option gives its holder the right to sell an asset for a specified price on or before the option’s expiration date. 
B. A call option will be exercised only if the market value of the underlying asset is more than the exercise price. 
C. A put option’s profit increases when the value of the underlying asset increases.

A. The notional principal amounts are exchanged at contract initiation and at the termination of the swap.  
B. Only a net payment is made on each settlement date.  
C. If interest rates decrease, the swap has a negative value to the fixed rate payer.

A. writing an interest rate put and buying an interest rate call. 
B. buying an interest rate put and an interest rate call. 
C. writing an interest rate call and buying an interest rate put.

A. The good to be exchanged and the price at which the exchange will be made. 
B. The time at which the exchange will take place. 
C. All of above are agreed upon.

A. prevent arbitrage and enforce federal regulations. 
B. act as guarantor to both sides of a futures trade. 
C. reduce transaction costs by making contract prices public.

A. Investors can use equity forward contracts to speculate on stock-price increases. 
B. Dividend payments are usually included in equity forward contracts. 
C. Equity forward contracts may require asset delivery or cash settlement.

A. adding the present value of the expected dividend payments to the current asset price.
B. subtracting the present value of the expected dividend payments from the exercise price.
C. subtracting the present value of the expected dividend payments from the current asset price.

A. Since the call option is "in the money" investor D is not required to deposit initial margin. 
B. Since investor D owns at least 100 shares of Disney stock, he must deposit initial margin in the amount of 100% of the option premium. 
C. Since investor D owns at least 100 shares of Disney stock, no additional margin is required.

A. transactions costs are usually smaller in derivatives markets, than for similar trades in the underlying asset. 
B. derivatives markets help keep interest rates down and supply valuable price information. 
C. derivatives allow the shifting of risk to those who can most efficiently bear it.

A. obligated herself to sell 100 shares of Bank of America stock and receive $5500 during the specified time period (expiration date in October). 
B. purchased the right to decide whether to sell 100 shares of Bank of America stock and receive $5500 during the specified time period (expiration date in October). 
C. obligated herself to purchase 100 shares of Bank of America stock and pay $5500 during the specified time period (expiration date in October).

A. At expiration, the buyer of the call will not make a profit unless the stock’s price exceeds $30. 
B. At expiration, the writer of the call will only experience a net loss if the price of the stock exceeds $34. 
C. A covered call position at these prices has a maximum gain of $9 and the maximum loss of the stock price less the premium.

A. the interest differential between a loan made at the contract rate and one made at the market rate at contract expiration. 
B. a discount factor based on LIBOR at settlement. 
C. a discount factor based on the contract LIBOR rate.

A. Swiss firm has a comparative advantage borrowing in the U. S. 
B. Swiss firm has a comparative advantage borrowing in Switzerland. 
C. U.S. firm has a comparative advantage in borrowing in the U. S.

A. LIBOR is a lending rate, while Euribor is a borrowing rate. 
B. LIBOR is a representative borrowing rate on U. S. dollars, while Euribor is a representative borrowing rate on euros. 
C. LIBOR is a global risk-free rate, while Euribor is a European risk-free rate.

A. If LIBOR increases unexpectedly over the contract term, the long will be required to make a cash payment at settlement. 
B. FRAs can be based on interest rates for 30, 60, or 90-day periods. 
C. The contract rate will change with LIBOR over the term of the agreement.

A. breakeven point for the seller is the strike price minus the option premium. 
B. call holder will exercise (at expiration) whenever the strike price exceeds the stock price. 
C. breakeven point for the buyer is the strike price plus the option premium.

A. All futures contracts are bought and sold on organized exchanges and the terms of futures contracts are determined by the buyers and sellers themselves. 
B. The Clearinghouse serves to guarantee the performance of all parties to futures contracts. 
C. Both are true.

A. Since the equity value fell below the maintenance level, a variation margin is called. 
B. Due to the fact that the equity value falls below the initial margin, a variation margin is called to restore the equity value of the account to it’s initial level. 
C. The equity value falls below the initial margin.

A. the party terminating the forward contract has no default risk, but both counterparties face default risk. 
B. there is no future liability, but default risk remains for all parties until the original contract settlement date. 
C. the party terminating the contract is exposed to default risk, but has no further asset price risk.

A. may result in a margin balance above the initial margin amount and may be done more often than daily. 
B. is only done when the settlement price is below the maintenance price. 
C. effectively adjusts the price of the future to the new equilibrium level.

A. Long call option/short put option and long stock position. 
B. Covered call and short stock/long call. 
C. Short put option/long call option and protective put.

A. profit the writer of the put option can make is $10. 
B. profit the buyer of a put option can make is $65. 
C. loss the writer of a put option can make is $75.

A. DM 25 million to Party C at the initiation of the swap. 
B. $10000000 to Party C at the initiation of the swap. 
C. $10000000 to Party C at the initiation of the swap.