IIA Exam IIA-CFSA Topic 6 Question 67 Discussion

Actual exam question for IIA's IIA-CFSA exam

Question #: 67
Topic #: 6

A derivative with a convex payoff-profile at some point before the option's maturity is a simple plan vanilla option. As the option becomes progressively more-in-the money, the rate at which the position makes money increases until asympathetically approaches the linear payoff of the future. Similarly, as the option becomes progressively more out-of -- the money, the rate at which the position loses money decreases until that rate becomes zero. This is an example of:

ASpot rate

BNon linear derivate

CLinear derivate

DNone of these

Show Suggested Answer

Suggested Answer: B

by Kanisha at Nov 13, 2024, 11:43 PM

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Bettye

8 months ago

Joke's on you, the answer is clearly B) Non linear derivative. I've got this option trading thing down to a science!

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Delbert

8 months ago

Easy peasy, B) Non linear derivative. Gotta love those asymptotic payoff profiles!

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Bobbie

7 months ago

I always find it intriguing how the rate at which the position loses money decreases as the option gets more out-of-the-money.

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Linn

7 months ago

Definitely, the asymptotic payoff profiles make non linear derivatives interesting.

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Tran

7 months ago

It's fascinating how the rate at which the position makes money increases as the option gets more in-the-money.

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Mable

7 months ago

I agree, B) Non linear derivative is the correct answer.

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Candra

8 months ago

I think it's C) Linear derivate because the payoff profile becomes linear as the option gets closer to maturity.

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Bong

8 months ago

I agree with Teresita, it makes sense that a convex payoff-profile would be a non linear derivative.

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Jillian

8 months ago

Ah, the old 'spot rate vs. linear derivative' conundrum. I'm going with B) Non linear derivative on this one.

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Ernie

8 months ago

Hmm, this seems like a trick question. The description matches the characteristics of an option, so I'm going with B) Non linear derivative.

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Johanna

7 months ago

I agree, it's all about the convex payoff profile.

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Alona

7 months ago

Yeah, it definitely fits the description of a non linear derivative.

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Nakita

8 months ago

I think you're right, it does sound like a non linear derivative.

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Teresita

8 months ago

B) Non linear derivate

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Rashad

8 months ago

This question is definitely testing our understanding of derivatives and their payoff profiles. I'd say the correct answer is B) Non linear derivative.

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