NISM Series XIII | Common Derivatives | Mock Test 1.7 | 50 Solved Questions part 2
NISM Series XIII: Common Derivatives
Mock Test 1.7: Solved MCQs (Part 2: Q51 - Q100)
📝 PART 2 INSTRUCTIONS:
This section completes Mock Test 1.7. It covers Basis Risk, Interoperability, Gold Standard Math, and Clearing Member Obligations. Click each question to reveal the solution.
Q 51. Which primary factor determines the price of a derivative?
A) SEBI - The Regulator
B) The Exchange
C) Brokers
D) The price of the underlying asset
View Answer
Answer: D) The price of the underlying asset
Explanation: The price of a derivative is primarily driven by the price movements of its underlying asset. Value depends fundamentally on the "base" variable.
Q 52. Which of the following best describes the central bank's objective when intervening in a managed float foreign exchange market?
A) For investing surplus foreign exchange reserves
B) To increase currency market volatility
C) Purchase USD to build forex reserves
D) To reduce volatility and influence the direction of currency movement
View Answer
Answer: D) To reduce volatility and influence the direction of currency movement
Q 53. If the USD-INR spot rate is Rs 82, what is the moneyness of a long USD call option with a strike price of Rs 83?
A) In the money
B) Out of the money
C) At the money
View Answer
Answer: B) Out of the money
Explanation: For a Call option: If Spot < Strike, it is Out of the Money (OTM). Here, 82 < 83.
Q 54. In currency derivatives trading, how frequently is the initial margin for a portfolio comprising futures and options deducted?
A) On a real time basis
B) At the end of the day
C) Every one hour
D) Every two hours
View Answer
Answer: A) On a real time basis
Q 55. TM Prop: Buy 12, Sell 2. Client A: Buy 12, Sell 2. Client B: Buy 12, Sell 2. TM Total Open Position (USD)?
A) 30,000
B) 10,000
C) Zero
D) 20,000
View Answer
Answer: A) 30,000
Explanation: Prop (10) + Client A (10) + Client B (10) = 30 lots x 1000 = 30,000 USD.
Q 56. With no bid-ask spread, the premium to buy a call option is the same as the premium to sell it. True or False?
A) True
B) False
View Answer
Answer: A) True
Q 57. Exports and imports are equal. Proceeds received 1-2 days before payments. Primary risk?
A) Risk of forward premia
B) Almost no currency risk
C) Risk of INR appreciation against USD
D) Risk of INR depreciation against USD
View Answer
Answer: C) Risk of INR appreciation against USD
Q 58. OTC 1m: 86.60/75. Futures 1m: 87.10/20. Possible arbitrage trade and profit per USD?
A) Buy OTC/Sell Fut, 45p
B) Sell OTC/Buy Fut, 60p
C) Buy OTC/Sell Fut, 36p
D) Buy USDINR in OTC and sell in futures, 35 paise
View Answer
Answer: D) Buy USDINR in OTC and sell in futures, 35 paise
Calculation: Buy @ 86.75 (OTC Ask), Sell @ 87.10 (Fut Bid). Profit = 0.35.
Q 59. What are the regulatory guidelines for brokers advertising in public media?
A) Television allowed without restriction
B) 5+ years license required
C) 8+ years license required
D) A broker must obtain prior approval from the stock exchange before advertising
View Answer
Answer: D) A broker must obtain prior approval from the stock exchange before advertising
Q 60. In exchange-traded currency derivatives, fund obligations are computed on a ________ basis.
A) Client Level
B) Gross
C) Netted
D) Delivery against payment
View Answer
Answer: C) Netted
Q 61. Determining open positions and calculating MTM margin is called:
A) Payin - Payout
B) Risk Management
C) Settlement
D) Clearing
View Answer
Answer: D) Clearing
Q 62. An option writer is always obligated to fulfill the contract if exercised. True or False?
A) True
B) False
View Answer
Answer: A) True
Q 63. 10 gold units = Rs 90,000 = USD 1050. Value of 1 USD in INR?
A) Rs. 84.63
B) Rs. 85.71
C) Rs. 86.33
D) Rs. 87.40
View Answer
Answer: B) Rs. 85.71
Calculation: 90,000 / 1050 = 85.71.
Q 64. Why does BASIS RISK arise?
A) Standardized futures expiry date
B) Standardized futures contract amount
C) Both of the above
D) None of the above
View Answer
Answer: C) Both of the above
Q 65. Better than expected Indian GDP growth data results in:
A) INR appreciating against USD
B) INR depreciating against USD
C) No change
D) None of the above
View Answer
Answer: A) INR appreciating against USD
Q 66. Fund for protecting clients of defaulter members:
A) Default Protection Fund
B) Investor Protection Fund
C) Investor Grievance Fund
D) Member Default Fund
View Answer
Answer: B) Investor Protection Fund
Q 67. Rohan buys 30 lots JPYINR @ 63. Settle @ 63.30. P&L?
A) Rs 900 Profit
B) Rs 9,000 Profit
C) Rs 90,000 Profit
D) Rs 9,00,000 Profit
View Answer
Answer: B) Profit of Rs 9,000
Explanation: (63.30 - 63) x 30 x 1000 = 9,000. (JPYINR Lot Size is 100,000, price is per 100).
Q 68. Correct statement for Exchange Traded Derivatives:
A) Decentralized counterparty risk
B) Only stocks and currencies
C) Bilateral settlement
D) Efficient risk management practices
View Answer
Answer: D) Exchange Traded Derivatives have efficient risk management practices
Q 69. Bank quotes 83.10 / 83.12. At what price can an exporter SELL 1 USD?
A) 83.10
B) 83.11
C) 83.12
D) 83.13
View Answer
Answer: A) 83.10
Logic: Exporter sells at the Bid price (the price the bank buys at).
Q 70. Total Open Interest used for monitoring intraday limits is:
A) Current OI
B) OI at end of previous day
C) Average OI
D) Minimum OI
View Answer
Answer: B) Total open interest at the end of previous day
Q 71. Operating range for ET currency options is based on:
A) Delta
B) Theta
C) Rho
D) All of the above
View Answer
Answer: A) Delta
Q 72. Treasury head views interest rate gap between USA and India will widen. Strategy?
A) Sell USDINR futures
B) Buy USDINR futures
C) No hedge
D) Buy 1m/Sell 6m
View Answer
Answer: B) Buy USDINR futures
Q 73. Who issues guidelines for ET derivatives accounting?
A) ICSI
B) SEBI
C) RBI
D) ICAI
View Answer
Answer: D) ICAI
Q 74. Carry forward duration for "recognized stock exchange" derivative loss?
A) 6 years
B) 7 years
C) 8 years
D) 10 years
View Answer
Answer: C) 8
Q 75. GVK: Concerned about USD weakening against INR. Strategy?
A) Long USDINR
B) Short USDINR
C) Long EURINR
D) Short EURINR
View Answer
Answer: B) USD depreciating against INR. Short USDINR
Q 76. Liquid networth for CM after margins must be at least:
A) Rs. 1 crore
B) Rs. 80 lacs
C) Rs. 75 lacs
D) Rs. 50 lacs
View Answer
Answer: D) Rs. 50 lacs
Q 77. Current Spot: 83. Long Call strike 84 moneyness?
A) At-the-money
B) In-the-money
C) Out-of-the-money
D) None
View Answer
Answer: C) Out-of-the-money
Q 78. Where must a broker upload KYC information?
A) SEBI
B) Depository
C) Clearing Bank
D) KRA
View Answer
Answer: D) KRA
Q 79. Spot: 82. Future at premium. Expects spot stays 82 at expiry. Action?
A) Sell USDINR current future
B) Buy USDINR current future
C) Buy 1m/Sell 3m
D) Sell 1m/Buy 3m
View Answer
Answer: A) Sell USDINR current future
Q 80. Minimum increment in bid/offer is:
A) Bid
B) Ask
C) Spread
D) Tick
View Answer
Answer: D) Tick
Q 81. Risk from denial of matched orders by clients:
A) Market
B) Regulatory
C) Operational
D) None
View Answer
Answer: C) Operational
Q 82. Difference between premium and intrinsic value:
A) Time Value
B) Strike Price
C) Option Value
D) Expiry Value
View Answer
Answer: A) Time Value
Q 83. Futures and options differ in rights and obligations. True or False?
A) True
B) False
View Answer
Answer: A) True
Q 84. Settlement method for USDINR futures?
A) Cash
B) Physical
C) Buyer convenience
View Answer
Answer: A) Cash
Q 85. Largest market size globally?
A) Currency
B) Interest rate
C) Equity
D) Commodity
View Answer
Answer: B) Interest rate derivatives
Q 86. Position limits for ET interest rate derivatives provided by:
A) SEBI
B) FEMA
C) Stock Exchanges
D) Ministry of Finance
View Answer
Answer: A) SEBI
Q 87. US rate 4%, UK 1%. Spot GBPUSD 1.5. Closest 1-yr future?
A) 1.7325
B) 1.5445
C) 1.6500
D) 1.6005
View Answer
Answer: B) 1.5445
Logic: 1.5 x (1.04 / 1.01) = 1.5445.
Q 88. Operating range for ET options based on 'Rho'. True or False?
A) True
B) False
View Answer
Answer: False
Explanation: It is based on Delta.
Q 89. Members of the Exchange are known as:
A) Custodians
B) Trading Members / Stock Brokers
C) Clearing Members
D) Depository Participants
View Answer
Answer: Trading Members / Stock Brokers
Q 90. Option contract expiry time on last trading day?
A) 7.00 PM
B) 5.30 PM
C) 4.00 PM
D) 12.30 PM
View Answer
Answer: 12.30 PM
Q 91. Receives 5000 USD in 3m. Wants transparent pricing. Hedge?
A) Short OTC
B) Short ET 3m USDINR
C) Long OTC
D) Long ET
View Answer
Answer: He should short Exchange Traded 3 months USDINR contract
Q 92. Currency pair allowed in Option trading in India:
A) USDJPY
B) EURJPY
C) GBPJPY
D) All of the above
View Answer
Answer: USDJPY
Q 93. SEBI Act 1992 vs SCRA 1956 govern trading?
A) True
B) False
View Answer
Answer: False
Explanation: SCRA 1956 is the main act.
Q 94. Weather insurance derivative underlying:
A) Temp
B) Actual Rainfall
C) Storms
D) None
View Answer
Answer: Actual Rainfall
Q 95. Base price of futures launch day:
A) Settle Price
B) Theoretical futures price
C) IRP price
D) First trader price
View Answer
Answer: Theoretical futures price
Q 96. Forecasting movements valid option?
A) Volumes
B) Fixed indicators
C) Economic country only
D) Significant deviations from the past readings of economic indicators
View Answer
Answer: Significant deviations from the past readings of economic indicators
Q 97. US Nonfarm payroll rise strengthening USD?
A) True
B) False
View Answer
Answer: True
Q 98. Option seller obligated to perform, no demand right. True or False?
A) True
B) False
View Answer
Answer: True
Q 99. Offsetting maturity hedge name:
A) Delta Hedging
B) Calendar Spread
C) Arbitrage
D) Swaps
View Answer
Answer: Calendar Spread
Q 100. Member trading for self/clients and clearing self/others through CH:
A) Professional CM
B) Trading Member
C) Clearing Member
D) Trading cum Clearing Member
View Answer
Answer: Trading cum Clearing Member
🚀 Consistency is Key!
You have completed the full 100 questions of NISM 1.7. Keep revising the MTM and IRP formulas as they are the backbone of this module.
Visit Apollo Alpha ShopDhaval Visariya
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