Trading in stock index futures a now exceeds buying

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26. Trading in stock index futures A. now exceeds buying and selling of shares in most markets. B. reduces transactions costs as compared to trading in stocks. C. increases leverage as compared to trading in stocks. D. generally results in faster execution than trading in stocks. E. all of the above. Trading in stock index futures now exceeds buying and selling of shares in most markets, reduces transactions costs as compared to trading in stocks, increases leverage as compared to trading in stocks, and generally results in faster execution than trading in stocks. Difficulty: Moderate 27. Commodity futures pricing Commodity futures are similar to other types of futures contracts but the cost of carrying must be considered. The cost of carrying includes interest costs, storage costs, and allowance for spoilage. Difficulty: Easy 23-12
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Chapter 23 - Futures, Swaps, and Risk Management 28. Arbitrage proofs in futures market pricing relationships No-arbitrage relationships are stronger than arguments such as the CAPM, but may be less precise if transactions or storage costs are not known. Difficulty: Difficult 23-13
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Chapter 23 - Futures, Swaps, and Risk Management 29. One reason swaps are desirable is that For example, a firm can change a floating-rate obligation into a fixed-rate obligation and vice versa. Difficulty: Moderate 30. Which two indices had the lowest correlation between them during the 2001-2006 period? A. S&P and DJIA; the correlation was 0.957 B. S&P and NASDAQ; the correlation was 0.899 C. DJIA and Russell 2000 the correlation was 0.758 D. S&P and NYSE; the correlation was 0.973 E. NYSE and DJIA; the correlation was 0.931 The correlations are shown in Table 23.2. Difficulty: Easy 31. Which two indices had the highest correlation between them during the 2001-2006 period? The correlations are shown in Table 23.2. Difficulty: Easy 23-14
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Chapter 23 - Futures, Swaps, and Risk Management
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