Question 68. 68. Derivatives dealers primarily conduct derivatives transactions

Question

Question 68.68. Derivatives dealers primarily conduct derivatives transactions for which of the following reasons? (Points : 1)        to enhance the returns on their other investment transactions
       to profit off of their ability to execute trades at the right time
       to profit off of their market making services
       to provide services to enhance the overall attractiveness of their product line
       none of the above Question 69.69. Which of the following methods is not permitted to satisfy the SEC's requirements for disclosure of derivatives activity? (Points : 1)        an explanation in the chairman's letter
       a Value-at-Risk figure
       a sensitivity analysis
       a table of market values and related terms
       none of the above Question 70.70. Hedge accounting is which of the following? (Points : 1)        describing all hedges in footnotes to accounting statements
       deferring all recording of hedge profits and losses until the hedge is over
       associating the derivative profit or loss with the instrument being hedged
       all of the above
       none of the above Question 68.68. Derivatives dealers primarily conduct derivatives transactions for which of the following reasons? (Points : 1)        to enhance the returns on their other investment transactions
       to profit off of their ability to execute trades at the right time
       to profit off of their market making services
       to provide services to enhance the overall attractiveness of their product line
       none of the above

Explanation / Answer

68.68 A derivative dealer is always in a better state to conduct derivative transaction as compare to a normal derivative trader. This is because Dealers know the internal matters and market news in advance so they better know what is going to happen in the market. They know whether the underlying will go up or down and play the bid accordingly. Thus, the most appropriate option is to profit off of their ability to execute trades at the right time.

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