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8006 – Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition

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Showing 13–15 of 15 questions

Question 13

[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]

Which of the following best describes a shout option

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    an option in which the holder of the option has the right to reset the strike price to be atthe-money once during the life of the option

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    an option which kicks in as a plain vanilla option if the underlying hits an agreed threshold

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    an option in which the buyer of the option has the option to extend the expiry of the option upon the payment of an extra premium

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    an option whose expiry is automatically extended if it finishes out of the money.


Question 14

A refiner may use which of the following instruments to simultaneously protect against a fall in the prices of its products and a rise in the prices of its inputs:

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    crude oil swaps

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    options on the crack spread

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    crude oil futures

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    calendar spread options


Question 15

When graphing the efficient frontier, the two axes are:

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    Asset beta and standard deviation of the market portfolio

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    Expected return and asset's beta

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    Portfolio return and market standard deviation

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    Portfolio return and portfolio standard deviation