Mark these statements T(true) or F(false) according to the information in the Text and Glossary. If they are false say why.

1. Derivatives are securities whose price is dependent upon or derived from one or more underlying assets.

2. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value means to have a short position. F

3. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value means to have a long position. F

4. Hedging is taking an offsetting position in a related security. T

5. A forward contract is a cash market transaction in which delivery of the commodity is deferred until after the contract has been made. T

6. Most forward contracts don't have standards and aren't traded on exchanges.

7. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. T

8. Financial futures contracts call for physical delivery of the asset. T

9. Financial futures contracts are traded over the counter. F

10. Stock index futures contracts are settled with a cash delivery rather than with the delivery of a security.

11. Put option is a contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. T

12. A call option gives the holder the right to buy shares. T

13. A put becomes less valuable as the price of the underlying stock depreciates relative to the strike price. F

14. Margin requirement is a sum of money that must be kept in an account at a brokerage firm. T

15. There is generally less risk and volatility when using futures options instead of futures.

16. The higher the strike price, everything else being equal, the higher the premium on CALL (buy) options and the lower the premium on PUT (sell) options. F

17. The greater the term of expiration, everything else being equal, the higher the premiums for both CALL and PUT options. T

18. A plain vanilla option can be opposed to an exotic option. T

19. Swap is traditionally the exchange of one security for another to change the maturity (bonds), quality of issues (stocks or bonds), or because investment objectives have changed.