Project Flashcards
What is futures and derivatives clearing?
Futures and derivatives clearing is a process of confirming, settling, and guaranteeing transactions in futures contracts and derivative instruments, ensuring the fulfillment of obligations by both parties.
What role does clearing technology play in futures and derivatives?
Clearing technology automates and facilitates the post-trade process, including trade validation, risk management, netting, margin calculations, settlement, and ensuring compliance with regulatory requirements.
What are the key components of futures and derivatives clearing technology?
Futures and derivatives clearing technology includes trade matching systems, risk management tools, collateral management, margining engines, and settlement systems to ensure efficient and secure processing of transactions.
How does clearing technology manage counterparty risk?
Clearing technology employs risk management mechanisms such as margin requirements, default funds, and netting arrangements to mitigate counterparty risk and ensure the financial integrity of the clearinghouse.
What is the purpose of margining engines in clearing technology?
Margining engines calculate and manage margin requirements, ensuring that participants maintain sufficient collateral to cover potential losses, thereby reducing systemic risk in derivatives markets.
How does clearing technology contribute to market stability?
Clearing technology enhances market stability by providing transparency, reducing counterparty risk, facilitating efficient trade settlement, and ensuring compliance with regulatory standards.
What challenges does clearing technology face in derivatives markets?
Challenges include technological complexities, regulatory compliance, adapting to evolving market structures, and ensuring interoperability between different clearing systems and participants.
What is the Agile model in software development?
The Agile model is an iterative and collaborative approach to software development that prioritizes adaptability, flexibility, and customer collaboration over rigid planning and documentation.
What are the core principles of the Agile model?
Core principles of Agile include customer collaboration, responding to change over following a plan, delivering working software frequently, and fostering a collaborative and self-organizing team.
What distinguishes Agile from traditional software development methodologies?
Agile prioritizes flexibility, adaptability, and responsiveness to change, whereas traditional methodologies focus on extensive upfront planning, documentation, and rigid processes.
What are the key practices within the Agile model?
Key practices in Agile include Scrum, Kanban, Extreme Programming (XP), iterative development, continuous integration, frequent feedback loops, and regular retrospectives.
How does Agile foster customer collaboration?
Agile involves continuous customer involvement throughout the development process, encouraging frequent feedback, and adapting to changing requirements to deliver a product that meets customer needs.
What is the role of iterations in Agile?
Iterations, or sprints in Scrum, involve breaking the project into small, manageable increments, allowing for frequent inspection, adaptation, and the delivery of potentially shippable increments of software.
What benefits does the Agile model offer in software development?
Agile promotes faster time-to-market, increased customer satisfaction through continuous feedback, improved quality, adaptability to changing requirements, and enhanced team collaboration and morale.
What is a derivative in finance?
A derivative is a financial instrument whose value is derived from the performance of an underlying asset, index, rate, an event , or another financial instrument.
Name four common types of derivatives.
Options, futures, forwards, and swaps are common types of derivatives.
Define an options contract.
An options contract gives the holder the right, but not the obligation, to buy (call option) or sell (put option) an asset at a predetermined price within a specified timeframe.
How do derivatives help manage risk in finance?
Derivatives allow individuals and businesses to hedge against price fluctuations, interest rate changes, and other market risks by offsetting potential losses in one position with gains in a derivative position.
What’s the key characteristic of a futures contract?
Futures contracts obligate the parties involved to buy or sell an asset at a predetermined price and date in the future, providing standardized terms for trading.
Explain the purpose of swaps in finance.
Swaps are used to exchange cash flows or liabilities between two parties, often to manage interest rate or currency risks.
What is the Black-Scholes model used for in finance?
The Black-Scholes model is used to calculate the theoretical price of European-style options by considering factors like underlying asset price, volatility, time to expiration, interest rates, and strike price.
Name some key factors/options Greeks in options pricing.
Delta (sensitivity to underlying price changes), Gamma (rate of change in delta), Theta (time decay), and Vega (sensitivity to changes in volatility) are important options Greeks influencing options pricing.
How can derivatives be used for speculative purposes?
Traders and investors use derivatives to speculate on the future direction of asset prices, aiming to profit from anticipated price movements without owning the underlying asset.
What is OTC clearing?,
OTC clearing involves a centralized process where a clearinghouse acts as an intermediary between two parties in an OTC derivative transaction to guarantee the trade’s performance.
