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PRMIA Exam 8006 Topic 1 Question 65 Discussion
Actual exam question for
PRMIA's
Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition exam
Question #: 65
Topic #: 1
[All Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition Questions]
Topic #: 1
A refiner may use which of the following instruments to simultaneously protect against a fall in the prices of its products and a rise in the prices of its inputs:
Suggested Answer:
B
The crack spread is the difference between the price of refined products and crude oil. An option on the crack spread can protect a refiner from both a fall in the price of its output and a rise in the price of its inputs. Calendar spreads are options with different maturities. Crude oil futures and swaps only protect against an adverse change in the price of crude, and not that of refined products. Choice 'b' is the correct answer.
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