Derivatives on the CFA Level I exam cover forward contracts, futures, options, and swaps, from basic payoff structures to introductory pricing and hedging strategies. Weighted 5-8% (CFA Institute).
107 questions10 easy58 medium39 hard2026 syllabus
Sample Questions
Question 1
Easy
Which of the following best describes a derivative security?
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Correct Answer: C
Solution
C is correct.
A derivative is a financial instrument whose value depends on (is derived from) the value of an underlying asset, rate, or index.
Question 2
Medium
Which of the following is a forward commitment rather than a contingent claim?
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Correct Answer: C
Solution
C is correct.
An interest rate swap is a forward commitment: both parties are obligated to make payments according to the agreed schedule. Neither party has the right to walk away.
Question 3
Hard
An initial margin requirement in a standardized futures contract is most accurately described as:
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Correct Answer: A
Solution
A is correct. Initial margin in a futures contract is a performance bond (good-faith collateral) that both the long and short post with the clearinghouse when the position is opened. It is a small fraction of the contract's notional value, reflecting the leveraged nature of futures, and the clearinghouse uses it to absorb daily mark-to-market losses. The deposit is refundable: any unused balance is returned when the position is closed, which distinguishes it from non-refundable commissions or exchange fees.
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