8006 Exam Dumps : Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition

Systematic risk refers to market risk that cannot be diversified away. Specific risk relates to the unique risk from the securities selected in the portfolio, and these can be diversified away by adding other securities to the portfolio. Diversifiable risk is risk that can be diversified away, ie the same as specific risk. Portfolio risk is the total risk of the portfolio that includes both specific and systematic risk.

Short calls and short puts have negative gamma, ie their delta increases at a decreasing rate as the price of the underlying change. Likewise, remember that long calls and long puts have positive gamma.

The underlying asset in a Treasury note futures contract is any long term Treasury note with a maturity of no less than 6.5 years and no more than 10 years. The underlying asset in a treasury bond futures contract is any long term US Treasury bond with a maturity of more than 15 years and not callable within 15 years.

Note the difference betwen what the underlying asset is for treasury bond futures and treasury note futures. In either case, adjustments will be made for the coupon and maturity of the actual bond delivered (the concept of the adjustment of 'cheapest-to-deliver').