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Free GARP 2016-FRR Exam Braindumps (page: 18)

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387 Questions & Answers
Page 8 of 86

A large energy company has a recurring foreign currency demands, and seeks to use options with a pay-off based on the average price of the underlying asset on either a few specific chosen dates or all dates within a specific pricing window.
Which one of the following four option types would most likely meet these specific foreign currency demands?

  1. American options
  2. European options
  3. Asian options
  4. Chooser options

Answer(s): C



Which of the following statements about the interest rates and option prices is correct?

  1. If rho is positive, rising interest rates increase option prices.
  2. If rho is positive, rising interest rates decrease option prices.
  3. As interest rates rise, all options will rise in value.
  4. As interest rates fall, all options will rise in value.

Answer(s): A



To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?

  1. Unrated bonds issued and traded on a recognized exchange
  2. Equities and convertible bonds included in a main market index
  3. Commercial debts owed to a company in a form of receivables
  4. Mutual fund shares and similar unit investment vehicles subject to daily quotes

Answer(s): C



Which one of the following four exotic option types has another option as its underlying asset, and as a result of its construction is generally believed to be very difficult to model?

  1. Spread options
  2. Chooser options
  3. Binary options
  4. Compound options

Answer(s): D






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