Which of the following statements is FALSE?

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Question restatement: Which of the following statements is FALSE?

Option a: 'On the date a forward contract is signed, the forward price is determined so that the contract value is zero.' This is true by construction. When a forward contract is initiated, the forward price is set so that neither party has a gain or loss at inception, meaning the contract’s value is zero at t=0.

Option b: 'Once a forward contract has been signed, its value does not depend on the price of the underlying asset.' This is false. After signing, the value of a forward contract generally depends on movements in the spot price of the underlying asset (through changes in the position’s mark-to-market value) and on deviations from the agreed forward price. Thus the contract’s value is sensitive to the underlying asset’s price dynamics.

Option c: 'After a forward contract has been signed, its value depends on the forward price for a new forward contract with the same maturity date and the same underlying asset.' This statement is essentially true. If a new forward with the same maturity and underlying asset exists, the value of the existing forward is related to the difference between the existing forward price and the price implied by the new forward (or the market’s current forward for that maturity), reflecting how changes in the forward curve affect value.

Option d: 'After the signature date of a forward contract, the value of the contract for a short position is equal to the negative of the value for a long position.' This is correct due to the symmetry of gains and losses between long and short positions: value_long = − value_short at any time.

Summary: Each option was evaluated for logical consistency with forward contract economics. The statement that fails to hold under standard forward pricing is option b, which claims the value does not depend on the underlying asset’s price after signing; in reality, it does depend.

FIN 413 (LEC B01 B02 B03 Winter 2025) Quiz 3

Which of the following statements is FALSE?

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类似问题

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which market involves the trading of derivative securities?

Which of the following is a hedging instrument? _____

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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FIN 413 (LEC B01 B02 B03 Winter 2025) Quiz 3

Which of the following statements is FALSE?

查看解析

登录即可查看完整答案

类似问题

We are able to sell or go short futures and forwards, even when we don't own them, because they are derivatives. This means a contract is created each time a buyer and seller make a new transaction.

From a financial standpoint, futures are virtually identical to forwards

The main difference between forward and futures contracts is that:

Part 1Financial instruments with returns tied to previously issued securities are​ called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds

Which market involves the trading of derivative securities?

Which of the following is a hedging instrument? _____

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

更多留学生实用工具

希望你的学习变得更简单

Part 1Financial instruments with returns tied to previously issued securities are called:Part 2 A. financial derivatives B. reversible bonds C. hedge securities D. convertible bonds