n NISM Certifications
X NISM Series X
Medium

What is a fundamental requirement for entering into a forward currency market position?

Practice question from NISM Series XA- Investment Adviser (Level 1) Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    A banker participating as a Price Taker

  2. B

    A merchant acting as a Market Maker

  3. An underlying trade contract

    Correct answer

  4. D

    All of the above

Why this is the answer

Forward contracts derive their value from an underlying trade or exposure, and a formal underlying contract is essential before entering into a forward currency position.

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