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CFA Level I subject

Derivatives practice questions

Derivatives questions cover forwards, futures, swaps, options, replication logic, payoffs, and risk-transfer mechanics. This section currently includes 11 public practice questions across 11 topic modules, with explanations, formulas, traps, and key takeaways.

Indicative public exam weight: 5-8%. Start with a topic guide when you need focused review, or use adaptive mode for mixed practice and due reviews.

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Binomial Model

1 public question with explanations, formulas, and exam traps.

Forward Pricing

1 public question with explanations, formulas, and exam traps.

Put-Call Parity

1 public question with explanations, formulas, and exam traps.

Swaps

1 public question with explanations, formulas, and exam traps.

Moderate

Derivatives

Binomial Model

A stock price is 50. In one period it will move up by 20% or down by 15%. The risk-free rate per period is 4%. A one-period European call has exercise price 52. The call value is closest to:

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Moderate

Derivatives

Credit Derivatives

A portfolio manager buys credit protection on a corporate bond through a derivative contract. The manager pays periodic premiums and receives compensation if a defined credit event occurs. The position is most accurately described as:

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Moderate

Derivatives

Derivative Instrument and Market Features

A corporate treasurer enters a customized bilateral contract with a bank to exchange fixed payments for floating payments for five years. The contract is most accurately classified as:

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Moderate

Derivatives

Forward Pricing

A non-dividend-paying asset sells for 80. The annual risk-free rate is 5% with annual compounding, and a one-year forward contract is initiated today. The no-arbitrage forward price is closest to:

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Moderate

Derivatives

Forward Valuation

Six months remain on a forward contract on a non-income-producing asset. The original forward price is 103.50, the current spot price is 108.00, and the six-month risk-free rate is 2.0%. The value of the forward contract to the long is closest to:

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Moderate

Derivatives

Futures and Swaps

A futures contract and an otherwise comparable forward contract have the same underlying and maturity. Futures are most likely to differ from forwards because futures:

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Moderate

Derivatives

Option Payoffs and Profits

A trader buys a put with exercise price USD55 for a premium of USD4. At expiration, the underlying price is USD48. The put payoff and profit per share are closest to:

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Moderate

Derivatives

Option Valuation Concepts

A European call with exercise price 100 trades for 8 when the underlying is 104. The option's exercise value and time value are, respectively:

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Moderate

Derivatives

Option Valuation Concepts

Holding other inputs constant, which change most likely increases the value of both a European call and a European put on a non-dividend-paying stock?

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Moderate

Derivatives

Put-Call Parity

A non-dividend-paying stock trades at 52. A one-year European call with exercise price 50 trades at 6. The annual risk-free rate is 5%. The no-arbitrage European put price is closest to:

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Moderate

Derivatives

Swaps

At initiation, an interest rate swap's fixed rate is set so the contract has zero value to both parties. Six months later, market swap fixed rates fall below the original fixed rate. For the fixed-rate payer, the original swap most likely has:

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