FRM-FMP

anbu.edu
Finance Junkie
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Joined: Mon Feb 04, 2013 3:35 pm

FRM-FMP

Postby anbu.edu » Mon Apr 22, 2013 3:49 pm

Which of the following statements regarding a futures trade of a deliverable contract is FALSE?

A) The long is obligated to purchase the asset.
B) Equilibrium futures price is known only at the end of the trading day.
C) The short is obligated to deliver the asset.
D) The price is determined by open outcry.

Source schweser
The ans is B but why cant it be D - bcos future price is determined by exchange right?

vnraghuveer
Good Student
Posts: 20
Joined: Mon Apr 08, 2013 1:36 pm

FRM-FMP

Postby vnraghuveer » Tue Apr 23, 2013 10:25 am

Hi Anbu,

Although electronic trading systems replaced most of the open outcry methods of price discovery, some exchanges still have an open outcry for the purpose of price discovery of securities. So Option D is not false.

vnraghuveer
Good Student
Posts: 20
Joined: Mon Apr 08, 2013 1:36 pm

Postby vnraghuveer » Tue Apr 23, 2013 10:57 am

Option B is false because the equilibrium futures price is not the closing price of the day. It's generally the average price during the last half an hour of the trading


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