CFA一级百题进阶：衍生.doc

8. Derivatives Q-1. A derivative is best described as a financial instrument that derives its performance by: A. passing through the returns of the underlying. B. replicating the performance of the underlying. C. transforming the performance of the underlying. Solution: C. A derivative is a financial instrument that transforms the performance of the underlying. The transformation of performance function of derivatives is what distinguishes it from mutual funds and exchange traded funds that pass through the returns of the underlying. A is incorrect because derivatives, in contrast to mutual funds and exchange traded funds, do not simply pass through the returns of the underlying at payout. B is incorrect because a derivative transforms rather than replicates the performance of the underlying. 1-11 Q-2. Keven, a hedge fund manager, observes that the spot gold price is negatively correlated with interest rate. He intends to get profit from the short-term price movement. Which instrument is most suitable to him to long? A. forward B. future C. swap Solution: A. If futures prices are positively correlated with interest rates, futures contracts are more desirable to holders of long positions than are forwards. A negative correlation between futures prices and interest rates leads to the opposite interpretation, with forwards being more desirable than futures to the long position. If futures prices and interest rates are uncorrelated, forwards and futures prices will be the same. If futures prices are positively correlated with interest rates, futures contracts are more desirable to holders of long positions than are forwards. A negative correlation between futures prices and interest rates leads to the opposite interpretation, with forwards being more desirable than futures to the long position. The more desirable contract will tend to have the higher price. 2-11 Q-3. A credit derivative is a derivative contract in which the: A. clearinghouse provides a credit guarantee