Which of the Following Is an Out-Of-The-Money Counterparty in the Derivative

question 84

Multiple Choice

Which of the following is an out-of-the-money counterparty in the derivative securities market?

• A)Counterparty in a loan commitment contract.
• B)FI that trades in securities prior to their actual issue.
• C)Counterparty that is currently at an advantage in terms of cash flows.
• D)FI that guarantees to underwrite the performance of the buyer of the guaranty.
• E)Counterparty that is currently at a disadvantage in terms of cash flows.

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Definitions:

Treynor-Black Portfolio

A portfolio optimization model that blends a passive (market index) portfolio and an actively managed portfolio to achieve superior returns.

Sharpe Measure

A ratio used to evaluate the risk-adjusted return of an investment portfolio, by comparing its excess returns to the volatility of those returns.

Active Portfolio Managers

Investment professionals who make regular buy, hold, and sell decisions in an attempt to outperform standard benchmarks.

Active Portfolio

An investment portfolio actively managed by a portfolio manager or investor aiming to outperform a benchmark index through regular buying and selling of securities.