Question

1. The primary derivative instruments in use today are

Question options:

	A. real estate loans
	B. Treasury bonds
	C. plan vanilla derivatives
	D. futures, options, and swaps.
	E. Municipal bonds

2. AIG almost went bankrupt in 2008 because

Question options:

	A.the value of the securities underlying its credit default swaps declined significantly.
	B. it lacked the collateral required by buyers of its credit default swaps.
	C. prices of securities underlying their credit default swaps were hard to determine since they were no longer actively traded.
	D. All of these.

3. A call option is said to be "out of the money" if the

Question options:

	A. strike price equals the exercise price.
	B. stock price equals the strike price.
	C. stock price exceeds the strike price.
	D. strike price exceeds the stock price.

Answer 1

1) The primary derivative instruments are Forwards, futures, options and swaps.

So the correct option is D)

2) AIG almost went bankrupt in 2008 because the value of the securities underlying its credit default swaps declined , it lacked the collateral required by buyers and  prices of securities underlying their credit default swaps were hard to determine .

So the correct answer is D). All of these.

3) A call option is said to be "out of the money" if the stock price is lesser than the strike price and in the money if the stock price is greater than strike price

So the correct option is D) strike price exceeds the stock price.