Page 182 - DCOM510_FINANCIAL_DERIVATIVES

Unit 11: Clearing and Settlement

7. On the last day of trading, settlement for futures contracts takes place at: Notes
(a) Average of high and low for the underlying on that day
(b) Closing price of the underlying
(c) Closing price of the far month contract

(d) Closing price of the options contract
8. In the case of options, final exercise settlement is:
(a) Sequential
(b) Random

(c) Automatic
(d) Voluntary
9. Which of the following option contracts are compulsorily settled on exercise date?
(a) In the money options contracts

(b) At the money options contracts
(c) Out of the money options contracts
(d) Deep out of the money options contracts
10. On expiry of a derivatives contract, the settlement price is the

(a) Spot price of underlying asset
(b) Futures close price
(c) Sport price plus cost-of-carry
(d) None of the above

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Case Study Anticipated Acquisition by Euronext NV of the

London Stock Exchange Plc

Parties
Euronext N.V. (Euronext): Euronext N.V. (Euronext) is a pan-European exchange offering
listing and trading services in Belgian, Dutch, French and Portuguese securities through
the Brussels, Amsterdam, Lisbon and Paris bourse’s respectively. Euronext is active in
derivatives trading via Euronext.liffe, which comprises the London-based derivatives
exchange, LIFFE, together with Euronext’s Amsterdam, Brussels, Lisbon and Paris
derivatives exchanges. Euronext also holds certain interests in entities providing post-
trade services in the UK, discussed further below. The turnover of Euronext for the year
ended 31 December 2003 was approximately €660 million.
London Stock Exchange Plc (LSE): London Stock Exchange Plc (LSE) is a Recognised
Investment Exchange (RIE) under the Financial Services and Markets Act 2000 (FSMA). LSE
demutualised in 2000, and became a listed UK plc in 2001. LSE’s main business activities
are: trading services in spot markets (which include listing and trading services); the
generation and distribution of information products; and the development, implementation
Contd....

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